ACCOUNT: Leyte Park Hotel Inc.
I. Collect of Real Property Tax
CTA First Division Decision (CTA OC No. 012 - Collection of Sum of Money)
TACLOBAN CITY GOVERNMENT
(Plaintiff)
 That any provision in the contract
which will make the lessor liable to pay
real property taxes is null and void.
 The beneficial use is being leased or
granted for consideration to a taxable
person. Thus said lessee becomes liable
to the real property tax.
 The right to assess for the real property
taxes of LPH has not prescribed when
it sought to enforce collection. While
there have been partial payments of
RPT for the years 1995 to 1997, the
particular issue on prescription of the
taxes was from the taxable year 1998.
It had already initiated to enforce
collection in the year 2000 when it was
issued a warrant of levy against LPHI .
It was only through an action to enjoin
the enforcement of this levy by the
Province which prevented the City to
collect the subject tax. Subsequently,
the RTC decided to permanently enjoin
the City, hence it was unable to collect
which resulted in the suspension of the
period of prescription.
Province of Leyte
 Since the RPT accrues on the first day
of January, it makes that particular
property tax exempt until the end of
the year, regardless of the date of the
execution of the contract. Thus, it will
be exempt until the end of the taxable
year subject to the change of status on
the following first of January.
 Where a government instrumentality
leases the property to a private entity,
it shall be the beneficial user who is
liable to pay the tax.
 Since it was not a party to the contract
of Lease, it cannot be held liable under
such.
UCI (Defendant)
 Province of Leyte, APT and PTA as
owners of Leyte Park Hotel are not
exempt from payment of real property
taxes because they leased Leyte Park
Hotel to defendant UCI in the exercise
of its proprietary function. Hence, it
placed the property under the
commerce of man and it divested itself
of its sovereign capacity and became
bound by the terms of the contract of
lease.
 According to the terms of the said
contract, the owners of the property,
APT, PTA and Province of Leyte
undertook to pay the realty taxes
thereon. The realty tax is a tax on the
property itself and not on the
enjoyment or use thereof, thus the
owners should be the ones to pay the
same. Thus, it would be in violation of
UCI’s constitutional right to non-
impairment of clause to disregard such
provision
 Plaintiff is estopped form recovering
the amount prayed for from UCI
because it made a demand upon the
owners of the subject property for
payment of realty taxes and APT
acknowledged its taxability and
expressed its willingness to pay. APT
already made partial payments of the
taxes due which was received by
plaintiff.
 Plaintiff cannot collect the amount
prayed for as most of the claims has
already prescribed.
 CTA has no jurisdiction over the case
and defendant UCI because there is no
final and executory assessment for
taxes has yet attached.
Philippine Tourism Authority (PTA)
 As a government instrumentality, it is
exempt from RPT.
 The tax exemption is deemed
withdrawn when it leased the hotel to
a taxable entity. The liability of this
specific tax should based upon who
has beneficial use of the property,
regardless of the actual owner.

Privatization and Management Office (PMO)

 There is no cause of action to file the
case due to failure to allege a valid,
final and executory assessment because
not all the requirements for a valid
assessment have been complied with
(no posting or publication of a Notice
of Delinquency was made).
CTA First Division Decision (November 15, 2011)
 CTA ruled that the UCI is a taxable entity the beneficial use of the property should be
liable for real property.
 CTA ruled that the local government unit has 5 years counting from the end of each
quarter to collect the deficiency tax for the said period, unless it falls under the 3
circumstances which suspend the running of the prescriptive period. Applying this
principle, only the RPT due on the first quarter of the year 2000 has prescribed, since the
action was initiated beyond the 5yrs allotted.

Dissatisfied by the ruling of the Court of Tax Appeals in CTA OC No. 012, UCI sought recourse
before the CTA en banc by filing a Petition for Review, docketed as CTA EB Case No. 901

Petition for Review CTA EB Case No. 901

UCI (Petitioner)
 Relying on the case of City of Pasig v.
Republic of having the Philippines
where the Supreme Court declared that
“the law imposes the liability to pay
real estate tax on the Republic of the
Philippines for the portions of the
properties leased to taxable entities,”
UCI contends that it essentially
released the lessees from the obligation
of paying the realty tax. It is assumed
that the Republic passes on the real
estate tax as part of the rent of the
lessees, then latter are no longer
accountable for the tax in their capacity
as beneficial users.
Province of Leyte
 The City of Pasig case cannot be
applied in the present case because the
Supreme Court never stated explicitly
or impliedly that it has abandoned the
“beneficial user” theory.
 The CTA Special First Division has no
jurisdiction to interpret the validity of
contracts entered into by petitioner and
respondents.
 No Notice of Assessment was received
by respondent Province of Leyte. The
notice of assessment is indispensable in
the collection of taxes.
 No RPT may be assessed and collected
against respondent Province of Leyte
because it was not a privy to the
contract of lease.
  The Court in Division’s Decision is
incomplete as it failed to mention the
liability of respondents Province of
Leyte, PMO and PTA to real property
taxes. Subsequently, UCI requests the
court to order respondenTacloban City
Government to collect the entire real
property taxes due from respondents
Province of Leyte, PMO and PTA.
Tourism Infrastructure and Enterprise Zone
Autority (formerly PTA)
 Relying on the case of GSIS vs. City
Treasurer and City Assessor of the City
of Manila where the Supreme Court
held that “the unpaid tax attaches to
the property and is chargeable against
the taxable person who had actual or
beneficial use and possession of it
regardless of whether or not he is the
owner.”
 The City of Pasig case did not directly
pass upon the issue on which, between
the Republic and the taxable person to
whom the beneficial use was granted,
is liable in the payment of RPT.

Privatization and Management Office (PMO)

 Petitioner is liable for the real property
tax of LPH for the years 1995 to 2004.
As held in several cases, that in real
property taxation, realty taxes attaches
to the property and is chargeable
against the taxable entity who has
actual or beneficial use and possession
of it.
 As PMO and other respondents are by
law, tax-exempt, it is outside their
power to stipulate on their tax liability.
 The decision of the CTA Special First
Division has accorded complete relief
to the parties because the issue of
petitioner’s claim for reimbursement
should be threshed out in a proper
proceeding and in a different forum.
CTA EN BANC DECISION (August 22, 2014)
 UCI as the beneficial user of LPHI’s real properties is liable for real property taxes for
Years 1995-2004. The law provides that when the beneficial use of a real property owned
by the Republic or any of its political subdivision, is vested to a taxable person, the real
property is subject to tax. In this case, through the lease contract, the beneficial use of the
hotel real properties is granted to petitioner, a domestic corporation which is taxable.
Hence, these assets are likewise taxable.

 CTA is devoid of authority to order respondent Tacloban City Government to enforce

the alleged contractual obligation of respondents Province of Leyte, PMO and PTA. The
Court can only determine the extent of petitioner’s real property tax liability to
respondent
Tacloban City Government in relation to the beneficial use clause under Section 234 (a)
of R.A. 7610. The contractual obligations of the parties under the lease agreement
concern petitioner and the lessors only. Respondent Tacloban City Government is not
privy to the lease contract.
During the pendency of the proceeding in CTA EB Case No. 901, the City Government of Tacloban
issued warrants of levy over the properties owned by APT (now PMO), PTA and Province of Leyte.
PMO filed a motion for Suspension of Collection of Real Property Tax and Cancellation of Warrants
of Levy. PMO argued that

PMO Argument Tacloban City Government

 The move of respondent City in
levying the property is an attempt to
circumvent the Decision dated
November 15, 2011 of the CTA (Special
First Division). Also the amount
covered in the warrants of levy is
P65,969,406.74 for the alleged non-
payment of real property taxes
covering the 1989-2012. This
contradicts the Decision of the CTA
(Special First Division) that the taxes
due on the property as of June 2004
excluding the tax due for the first
quarter is P22,826,902.20 as only taxes
pertaining to the period of 1995-2004
may be collected and that the cause of
action to collect taxes pertaining to the
previous years have already
prescribed.
 PMO claims that the issuance of the
Warrants of Levy revealed the
intention of respondent Tacloban City
to sell the subject properties in a public
auction to satisfy the unlawful
assessment even before a judgment in
this appealed case is rendered by the
Court en banc
PTA (now Tourism Infrastructure Enterprise UCI
Zone Authority)
 Adopted PMO argument
 The RPT for the years 1995-1997 had
already been paid by petitioner UCI
 The issuance of the subject Warrants of
Levy is its right guaranteed under
Section 256 of RA 7610. Also, under
Section 257 it is provided that “from
the time that the RPT on Leyte Park
Property accrued and became unpaid,
the same constituted a lien thereon” in
favor of Tacloban City, hence,
collection may be enforced by levy.
 It can still pursue administrative
remedy of levy simultaneous with the
pending appeal since the case involves
taxes.
 The unpaid tax attaches to the property
itself, whoever the owner may be.
 the remedy sought by PMO of
suspension of collection is flawed,
instead it should paid under protest
pursuant to Section 252 of the LGC.
 It refutes the contention of PMO, PTA
and Province of Leyte that all
properties owned by the Republic are
exempt from levy and eventual public
auction, as there are only 2 instances
when property owned by the gov’t
cannot be sold at public auction, (1) if
there is a law providing for such
exemption, and (2) when the property
is of public dominion.

CTA en banc Resolution (Feb 7, 2013)

 The motion was granted since the implementation of the Warrants of Levy may
jeopardize the interest of the National Government and will render moot and academic
any ruling of the Court en banc
 The motion for Suspension was granted on the condition that PMO file a surety bond
equivalent to one and one-half of the amount sought to be collected by City Government
 of Tacloban.
 The deposit of surety bond is one of the conditions set by law in order to restrain the
collection of taxes and that it has no discretion to suspend the implementation.

On 14 February 2013, PMO filed its Motion for Exemption from Posting of Surety Bond before the
CTA en banc on the ground that National Government Agencies and Instrumentalities, such as PMO
are not and should not be, required to file any bond.

As precautionary measure, PMO filed its Compliance Ad Cautelam by posting a surety bond in order
to ensure suspension of the collection of real property tax sought by City Government of Tacloban,
and prevent the execution of warrant of levy.

On 1 March 2013 Court of Tax Appeals issued Resolution ruling that PMO’s Motion for Exemption
From Posting of Surety Bond as moot, by virtue of the latter’s filing of the surety bond. PMO filed
its Motion for Reconsideration of the aforesaid Resolution, but the same was denied by CTA en banc
in its 29 January 2014 Resolution.

The PMO filed on 08 April 2014 a Petition for Certiorari before the Supreme Court seeking to annul
and set aside the 07 February 2013, 01 March 2013 and 29 January 2014 Resolution of the CTA en
banc, docketed as GR No. 211839. PMO argued that It is well within the discretion of CTA to
dispense with the requirement of posting a surety bond. The State is not required to put up a bond
for any damages because it is presumed to be always solvent. The surety bond requirement is
applicable only when the applicant for the restraining order is an individual or entity other than the
State.

The City Government of Tacloban filed its Comment on 10 September 2014. On 2 February 2016, the
PMO filed a Motion for Early Resolution of the Petition.
In CTA EB Case No. 901, the CTA en banc rendered a Decision on 22 August 2014 dismissing UCI’s
Petition for Review.

On 26 September 2014, a Petition for Review on Certiorari was filed by UCI before the Supreme
Court assailing the 22 August 2014 Decision of the CTA en banc. It was docketed as GR No 241195.
PMO filed its comment to the Petition on 24 February 2015.