Almanzor should operate equally and uniformly on all
persons under similar circumstances or that CITATION: G.R. Nos. L-49839-46, 196 all persons must be treated in the same SCRA 322 manner, the conditions not being different both in the privileges conferred and the DATE: April 26, 1991 liabilities imposed. The market value of properties covered by P.D. No. 20 cannot be FACTS: equated with the market value of properties not covered. The former has naturally a J.B.L Reyes, et al., petitioners, much lesser market value in view of the owners of parcels of land in Tondo and Sta. rental restrictions. Consequently, the use of Cruz Districts, City of Manila which are the Comparable Sales Approach in the leased by tenants for a monthly rentals not assessment of the properties on the ground exceeding three hundred pesos (P300.00) in of uniformity is unreasonable. July 1971. Around that time, a law was passed prohibiting the increase of rentals of FULL TEXT: properties leased for rentals not exceeding P300.00 monthly and ejecting lessees after This is a petition for review on certiorari to the expiration of the usual legal period of reverse the June 10, 1977 decision of the lease. In 1973, respondent City Assessor of Central Board of Assessment Appeals1 in Manila re-classified and reassessed the CBAA Cases Nos. 72-79 entitled "J.B.L. value of the subject properties based on the Reyes, Edmundo Reyes, et al. v. Board of schedule of market values which entailed an Assessment Appeals of Manila and City increase in the acorresponding tax rates Assessor of Manila" which affirmed the prompting petitioners to file a Memorandum March 29, 1976 decision of the Board of Tax of Disagreement with the Board of Tax Assessment Appeals2 in BTAA Cases Nos. Assessment Appeals. They averred that the 614, 614-A-J, 615, 615-A, B, E, "Jose Reyes, reassessments made were "excessive, et al. v. City Assessor of Manila" and unwarranted, inequitable, confiscatory and "Edmundo Reyes and Milagros Reyes v. City unconstitutional" considering that the taxes Assessor of Manila" upholding the imposed upon them greatly exceeded the classification and assessments made by the annual income derived from their properties. City Assessor of Manila. They argued that the income approach should have been used in determining the The facts of the case are as follows: land values instead of the comparable sales approach which the City Assessor adopted Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land ISSUE: situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely Is the approach adopted by the City occupied as dwelling sites by tenants. Said Assessor appropriate in assessing the tenants were paying monthly rentals not property? exceeding three hundred pesos (P300.00) in July, 1971. On July 14, 1971, the National HELD: Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an No. The taxing power is an attribute increase in monthly rentals of dwelling units of sovereignty. However, the power to tax is or of lands on which another's dwelling is not unconfined as there are restrictions. The located, where such rentals do not exceed due process and equal protection clauses of three hundred pesos (P300.00) a month but the Constitution limit this power. The laws allowing an increase in rent by not more than 10% thereafter. The said Act also suspended SO ORDERED. (Decision of the Board of paragraph (1) of Article 1673 of the Civil Tax Assessment Appeals, Rollo, p. 22). Code for two years from its effectivity thereby disallowing the ejectment of lessees upon The Reyeses appealed to the Central Board the expiration of the usual legal period of of Assessment Appeals.1âwphi1 They lease. On October 12, 1972, Presidential submitted, among others, the summary of Decree No. 20 amended R.A. No. 6359 by the yearly rentals to show the income derived making absolute the prohibition to increase from the properties. Respondent City monthly rentals below P300.00 and by Assessor, on the other hand, submitted three indefinitely suspending the aforementioned (3) deeds of sale showing the different provision of the Civil Code, excepting leases market values of the real property situated in with a definite period. Consequently, the the same vicinity where the subject Reyeses, petitioners herein, were precluded properties of petitioners are located. To from raising the rentals and from ejecting the better appreciate the locational and physical tenants. In 1973, respondent City Assessor features of the land, the Board of Hearing of Manila re-classified and reassessed the Commissioners conducted an ocular value of the subject properties based on the inspection with the presence of two schedule of market values duly reviewed by representatives of the City Assessor prior to the Secretary of Finance. The revision, as the healing of the case. Neither the owners expected, entailed an increase in the nor their authorized representatives were corresponding tax rates prompting present during the said ocular inspection petitioners to file a Memorandum of despite proper notices served them. It was Disagreement with the Board of Tax found that certain parcels of land were below Assessment Appeals. They averred that the street level and were affected by the tides reassessments made were "excessive, (Rollo, pp. 24-25). unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes On June 10, 1977, the Central Board of imposed upon them greatly exceeded the Assessment Appeals rendered its decision, annual income derived from their properties. the dispositive portion of which reads: They argued that the income approach should have been used in determining the WHEREFORE, the appealed decision land values instead of the comparable sales insofar as the valuation and assessment of approach which the City Assessor adopted the lots covered by Tax Declaration Nos. (Rollo, pp. 9-10-A). The Board of Tax (5835) PD-5847, (5839), (5831) PD-5844 Assessment Appeals, however, considered and PD-3824 is affirmed. the assessments valid, holding thus: For the lots covered by Tax Declaration Nos. WHEREFORE, and considering that the (1430) PD-1432, PD-1509, 146 and (1) PD- appellants have failed to submit concrete 266, the appealed Decision is modified by evidence which could overcome the allowing a 20% reduction in their respective presumptive regularity of the classification market values and applying therein the and assessments appear to be in assessment level of 30% to arrive at the accordance with the base schedule of corresponding assessed value. market values and of the base schedule of building unit values, as approved by the SO ORDERED. (Decision of the Central Secretary of Finance, the cases should be, Board of Assessment Appeals, Rollo, p. 27) as they are hereby, upheld. Petitioner's subsequent motion for estimate of the properties predicated upon reconsideration was denied, hence, this prices paid in actual, market transactions petition. would be a uniform and a more credible standards to use especially in case of mass appraisal of properties (Ibid.). Otherwise stated, public respondents would have this The Reyeses assigned the following error: Court completely ignore the effects of the restrictions of P.D. No. 20 on the market THE HONORABLE BOARD ERRED IN value of properties within its coverage. In any ADOPTING THE "COMPARABLE SALES event, it is unquestionable that both the APPROACH" METHOD IN FIXING THE "Comparable Sales Approach" and the ASSESSED VALUE OF APPELLANTS' "Income Approach" are generally acceptable PROPERTIES. methods of appraisal for taxation purposes (The Law on Transfer and Business Taxation The petition is impressed with merit. by Hector S. De Leon, 1988 Edition). However, it is conceded that the propriety of one as against the other would of course The crux of the controversy is in the method depend on several factors. Hence, as early used in tax assessment of the properties in as 1923 in the case of Army & Navy Club, question. Petitioners maintain that the Manila v. Wenceslao Trinidad, G.R. No. "Income Approach" method would have 19297 (44 Phil. 383), it has been stressed been more realistic for in disregarding the that the assessors, in finding the value of the effect of the restrictions imposed by P.D. 20 property, have to consider all the on the market value of the properties circumstances and elements of value and affected, respondent Assessor of the City of must exercise a prudent discretion in Manila unlawfully and unjustifiably set reaching conclusions. increased new assessed values at levels so high and successive that the resulting annual real estate taxes would admittedly exceed Under Art. VIII, Sec. 17 (1) of the 1973 the sum total of the yearly rentals paid or Constitution, then enforced, the rule of payable by the dweller tenants under P.D. taxation must not only be uniform, but must 20. Hence, petitioners protested against the also be equitable and progressive. levels of the values assigned to their properties as revised and increased on the Uniformity has been defined as that principle ground that they were arbitrarily excessive, by which all taxable articles or kinds of unwarranted, inequitable, confiscatory and property of the same class shall be taxed at unconstitutional (Rollo, p. 10-A). the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]). On the other hand, while respondent Board of Tax Assessment Appeals admits in its Notably in the 1935 Constitution, there was decision that the income approach is used in no mention of the equitable or progressive determining land values in some vicinities, it aspects of taxation required in the 1973 maintains that when income is affected by Charter (Fernando "The Constitution of the some sort of price control, the same is Philippines", p. 221, Second Edition). Thus, rejected in the consideration and study of the need to examine closely and determine land values as in the case of properties the specific mandate of the Constitution. affected by the Rent Control Law for they do not project the true market value in the open market (Rollo, p. 21). Thus, respondents opted instead for the "Comparable Sales Taxation is said to be equitable when its Approach" on the ground that the value burden falls on those better able to pay. Taxation is progressive when its rate goes up Finally under the Real Property Tax Code depending on the resources of the person (P.D. 464 as amended), it is declared that the affected (Ibid.). first Fundamental Principle to guide the appraisal and assessment of real property The power to tax "is an attribute of for taxation purposes is that the property sovereignty". In fact, it is the strongest of all must be "appraised at its current and fair the powers of government. But for all its market value." plenitude the power to tax is not unconfined as there are restrictions. Adversely effecting By no strength of the imagination can the as it does property rights, both the due market value of properties covered by P.D. process and equal protection clauses of the No. 20 be equated with the market value of Constitution may properly be invoked to properties not so covered. The former has invalidate in appropriate cases a revenue naturally a much lesser market value in view measure. If it were otherwise, there would be of the rental restrictions. truth to the 1903 dictum of Chief Justice Marshall that "the power to tax involves the Ironically, in the case at bar, not even the power to destroy." The web or unreality spun factors determinant of the assessed value of from Marshall's famous dictum was brushed subject properties under the "comparable away by one stroke of Mr. Justice Holmes sales approach" were presented by the pen, thus: "The power to tax is not the power public respondents, namely: (1) that the sale to destroy while this Court sits. So it is in the must represent a bonafide arm's length Philippines " (Sison, Jr. v. Ancheta, 130 transaction between a willing seller and a SCRA 655 [1984]; Obillos, Jr. v. willing buyer and (2) the property must be Commissioner of Internal Revenue, 139 comparable property (Rollo, p. 27). Nothing SCRA 439 [1985]). can justify or support their view as it is of judicial notice that for properties covered by In the same vein, the due process clause P.D. 20 especially during the time in may be invoked where a taxing statute is so question, there were hardly any willing arbitrary that it finds no support in the buyers. As a general rule, there were no Constitution. An obvious example is where it takers so that there can be no reasonable can be shown to amount to confiscation of basis for the conclusion that these properties property. That would be a clear abuse of were comparable with other residential power (Sison v. Ancheta, supra). properties not burdened by P.D. 20. Neither can the given circumstances be nonchalantly The taxing power has the authority to make dismissed by public respondents as imposed a reasonable and natural classification for under distressed conditions clearly implying purposes of taxation but the government's that the same were merely temporary in act must not be prompted by a spirit of character. At this point in time, the falsity of hostility, or at the very least discrimination such premises cannot be more convincingly that finds no support in reason. It suffices demonstrated by the fact that the law has then that the laws operate equally and existed for around twenty (20) years with no uniformly on all persons under similar end to it in sight. circumstances or that all persons must be treated in the same manner, the conditions Verily, taxes are the lifeblood of the not being different both in the privileges government and so should be collected conferred and the liabilities imposed (Ibid., p. without unnecessary hindrance. However, 662). such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which is the promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.
By the public respondents' own computation
the assessment by income approach would amount to only P10.00 per sq. meter at the time in question.
PREMISES CONSIDERED, (a) the petition
is GRANTED; (b) the assailed decisions of public respondents are REVERSED and SET ASIDE; and (e) the respondent Board of Assessment Appeals of Manila and the City Assessor of Manila are ordered to make a new assessment by the income approach method to guarantee a fairer and more realistic basis of computation (Rollo, p. 71).