Republic of the Philippines

REGIONAL TRIAL COURT

11th Judicial Region
Branch 19
Digos City
Davao del Sur

NATIONAL FOOD AUTHORITY, SPECIAL CIVIL CASE No. 53-2018

Rep. by its Regional Director,
Lester Romeo F. Malana,
Petitioner,

FOR: Prohibition with

Application for Temporary
Restraining Order and/or
issuance of a writ of Preliminary
-versus- Injunction

CITY GOVERNMENT OF DIGOS,

Rep. by its City Mayor Atty.
Joseph R. Peñas, City Assessor of
Digos City Rep. by Hermelo A.
Embalsado in his capacity as City
Assessor, City Treasurer of Digos
City Rep. by Jesus B. Uy, Jr. in his
capacity as the City Treasurer of
Digos city, and Provincial Treasurer
of Davao del Sur Rep. by Farrah M.
Bidan, Provincial Treasurer,
Respondents.
x--------------------------------------------/

COMMENT/OPPOSITION
(AMENDED PETITION FOR PROHIBITION)

Comes now, respondent City Government of Digos through the

undersigned counsel and unto this Honorable Court by way of
comment/opposition to the Amended Petition for Prohibition most
respectfully avers THAT:

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 PREFATORY STATEMENT

Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure.1

With the ratification of the 1987 Constitution, taxation assumes

an even greater significance. Consequently, the power to tax is no longer
vested exclusively on Congress. Local legislative bodies are now given
direct authority to levy taxes, fees and other charges pursuant to Article
X, section 5 of the 1987 Constitution, which states:

Section 5. - Each Local Government unit shall have the

power to create its own sources of revenue, to levy taxes, fees
and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees and charges shall accrue exclusively to
the Local Governments.

The subsequent passage of the Local Government Code

supplements the Constitution with sections 151 and 186:

Section 151. Scope of Taxing Powers. - Except as otherwise

provided in this Code, the city, may levy the taxes, fees, and
charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied and
collected by highly urbanized and independent component cities
shall accrue to them and distributed in accordance with the
provisions of this Code.

The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality by not
more than fifty percent (50%) except the rates of professional
and amusement taxes.

Section 186. Power To Levy Other Taxes, Fees or Charges. -

Local government units may exercise the power to levy taxes, fees
or charges on any base or subject not otherwise specifically
enumerated herein or taxed under the provisions of the National
Internal Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees, or charges shall not be unjust,
excessive, oppressive, confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such
taxes, fees or charges shall not be enacted without any prior
public hearing conducted for the purpose.

1
NPC vs. City of Cabanatuan, G.R. No. 149110 April 9, 2003

2
 The authority of the Local Government Unit to levy annual ad
valorem tax on real properties within its jurisdiction is embodied under
section 232 in relation to section 234 of the Local Government Code
which provides:

Section 232. Power to Levy Real Property Tax. - A province

or city or a municipality within the Metropolitan Manila Area
my levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter
specifically exempted.

Section 234. Exemptions from Real Property Tax. - The

following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any

of its political subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable
person;

(b) Charitable institutions, churches, parsonages or convents

appurtenant thereto, mosques, non-profit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government owned
or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as

provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and

environmental protection.

Except as provided herein, any exemption from payment of real

property tax previously granted to, or presently enjoyed by,
all persons, whether natural or juridical, including all
government-owned or controlled corporations are hereby
withdrawn upon the effectivity of this Code. (Emphasis supplied)

Although as a general rule, LGUs cannot impose taxes, fees or

charges of any kind on the National Government, its agencies and
instrumentalities this rule now admits an exception, i.e., when specific
provisions of the LGC authorize the LGUs to impose taxes, fees or
charges on the aforementioned entities.

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 Tax exemptions are never presumed and are strictly construed
against the taxpayer and liberally in favor of the taxing authority. They
can only be given force when the grant is clear and categorical2.

Respondent through the office of the City Assessor assessed Real

Property Tax on the properties of petitioner consisting of land, buildings
and machineries located within Digos City annually. However, petitioner
fails to pay and have been delinquent since 2008 up to the present. The
Notices of Delinquency were personally served to petitioner on June 21,
2018.

Consequently, petitioner sent a letter to the Office of the City

Treasurer dated July 19, 2018 which was received on July 26, 2018. In
the said letter, petitioner reiterated their claim for exemption from the
payment of real property taxes on its properties in accordance with
their charter PD 4 as amended by PD 1770. Petitioner postulates that
since its charter is a special law, it cannot be repealed by a subsequent
general law such as the Local Government Code. Finally, petitioner
asserts that it is an instrumentality of the government which is
exempted under R.A. 7160 and relying on the opinion issued by the
Office of the Government Corporate Counsel (OGCC).

Petitioner filed this instant petition praying that they be

recognized as a government instrumentality and thus be exempt from
the payment of real property tax and for a Temporary Restraining Order
(TRO) and/or Writ of Preliminary Injunction pending the resolution of
the case to be issued in order to restrain respondents from pursuing the
collection of the real property taxes being imposed upon its properties
in the total amount of P12,298,153.13.

However, respondent strongly opposes the same on the following

grounds:

1. THE EXEMPTION GRANTED TO PETITIONER THROUGH ITS

CHARTER WAS EXPRESSLY REVOKED BY THE LOCAL
GOVERNMENT CODE;

2. PETITIONER IS A GOCC AND NOT A GOVERNMENT

INSTRUMENTALITY;

3. RESPONDENT DID NOT COMMIT GRAVE ABUSE OF DISCRETION

IN LEVYING REAL PROPERTY TAX UPON THE PROPERTIES OF
PETITIONER;

2
G.R. No. 155491 Smart Communications Inc. vs. The City of Davao, September 16, 2008

4
 4. PETITIONER IS NOT ENTITLED TO A TEMPORARY RESTRAINING
ORDER (TRO) AND/OR WRIT OF PRELIMINARY INJUNCTION.

5. FAILURE TO APPEAL THE ASSESSMENT WITHIN 60 DAYS FROM

THE RECEIPT OF THE NOTICE OF ASSESSMENT.

ARGUMENTS

THE EXEMPTION GRANTED TO PETITIONER WAS EXPRESSLY

REVOKED BY THE LOCAL GOVERNMENT CODE

Contrary to the contention of petitioner, the exemption from the

payment of real property tax granted to it by its charter, PD 4, as
amended was expressly revoked by the Local Government Code of 1991
under section 193 in relation to 234 of the same law quoted hereunder:

“Section 193. Withdrawal of Tax Exemption Privileges. -

Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or
controlled corporations, except local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions, are hereby withdrawn
upon the effectivity of this Code.”

Section 234. Exemptions from Real Property Tax. - The

following are exempted from payment of the real property tax:

(a) xxx
(b) xxx
(c) xxx
(d) xxx
(e) xxx

Except as provided herein, any exemption from payment

of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical,
including all government-owned or controlled
corporations are hereby withdrawn upon the effectivity of
this Code. (Emphasis supplied)

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 In Mactan Cebu International Airport Authority v. Marcos3,
the Court held that the Local Government Code unequivocally withdrew
the previously granted exemptions from realty taxes of government-
owned and controlled corporations (GOCCs).

In the case of City of Government of San Pablo, Laguna vs.

Reyes4 as cited in the case of NPC vs. Cabanatuan5 the court ruled that
section 193 of the LGC is an express, albeit general, repeal of all statutes
granting tax exemptions from local taxes.

Similarly, in the case of City of Davao v. RTC, Branch XII, Davao

City6 the Court declared GSIS liable for real property taxes for the years
1992 to 1994 since its previous exemption granted under PD 1146
being considered withdrawn with the enactment of the Local
Government Code in 1991.

The foregoing cases established the principle that the provisions

of the Local Government Code particularly section 193 in relation to
section 234 thereof is an express revocation of the exemption granted to
GOCCs such as petitioner in this case. Thus, the realty tax exemption
granted to petitioner under its charter is no longer applicable as it was
already unequivocally withdrawn after the passage of the Local
Government Code.

PETITIONER IS A GOCC AND NOT A GOVERNMENT

INSTRUMENTALITY

Under the introductory provisions of E.O. 292, a Government-

owned or Controlled Corporation (GOCC) is defined as follows, to wit;

“(13) Government-owned or controlled corporation refers to

any agency organized as a stock or non-stock corporation, vested
with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable
as in the case of stock corporations, to the extent of at least fifty-
one (51) percent of its capital stock: Provided, That government-
owned or controlled corporations may be further categorized by
the Department of Budget, the Civil Service Commissions, and the
Commission on Audit for purposes of the exercise and discharge

3
G.R. No. 120082 September 11, 1996
4
G.R. No. 127708 March 25, 1999
5
G.R. No. 149110 April 9, 2003
6
G.R. No. 127383 August 18, 2005

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 of their respective powers, functions and responsibilities with
respect to such corporations.”

To be considered as a GOCC, an agency must be organized either

as a stock or non-stock corporation, vested with functions relating to
public needs whether governmental or proprietary in nature, and must
be owned by the government.

All of those requisites were present. First, petitioner is organized

as a stock corporation as provided in section 9 of PD No. 1770 which
states that:

“Section 9. Capitalization. The Authority shall have an

authorized capital stock of five billion pesos, divided into fifty
million shares of par value of one hundred pesos each. These
shares shall be wholly subscribed and paid by the national
government, local government units, or other government-owned
or controlled corporations.

The accumulated capital stock and surpluses of the National

Grains Authority shall be evaluated and shall be the initial paid in
capital of the Authority. The national government shall make
additional equity investments into the Authority out of funds
appropriated in the General Appropriations Act and other
appropriation laws as may be approved by the President in
accordance with the fund requirements of the Authority and funds
availability in the Treasury.” (Emphasis supplied)

Secondly, petitioner is vested with functions relating to public

needs since it has the mandate to ensure national food security and to
stabilize the supply and prices of rice both in the farm and consumer
levels. Whether or not it is governmental or proprietary in nature is
immaterial.

Finally, having been created, fully subscribed and funded by the

national government, there is no question that petitioner is owned by
the national government. Petitioner likewise admits that it is governed
by R.A. 10149 otherwise known as “GOCC Governance Act of 2011”.

On the other hand, petitioner cannot be considered as a

government instrumentality which is defined as follows:

“(10) Instrumentality refers to any agency of the National

Government, not integrated within the department framework
vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. This

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 term includes regulatory agencies, chartered institutions and
government-owned or controlled corporations”

From the above definition, a GOCC can be an instrumentality, but

an instrumentality may or may not necessarily be a GOCC. On the part of
petitioner, it fell short of the requirement due to the following reasons:

1. It is integrated within the department framework being an

attached agency of the DA subsequently transferred to the
Office of the President and although management is vested
upon its administrator, the latter is appointed by the President
of the Philippines; and

2. Albeit it administers special funds, it does not however enjoy

operational autonomy. This simply means that a government
agency should have powers both necessary and incidental to
act independently in its dealings without requiring approval
from a higher office. However, petitioner does not have the
autonomy to enter and enforce loan agreements on its own
without first securing approval thereof as provided in PD 4.

The cases of MIAA vs. CA7 and MCIAA vs. City of Lapu-lapu8 do
not apply in this case although they were declared as government
instrumentality vested with corporate powers since in both cases MIAA
and MCIAA have no capital stock that is divided into shares unlike
herein petitioner. Whereas in the case of PRA vs. City of Paranaque9,
because although it has a capital stock but it is divided into no par value
shares.

RESPONDENT DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN

LEVYING REAL PROPERTY TAX UPON THE PROPERTIES OF
PETITIONER

Exemption of certain real property from RPT is not automatic. In

fact, section 206 of the Local Government Code provides for the
procedure to be followed by an individual or corporation applying for
exemption on their properties. They must present sufficient
documentary evidence in support of their claim for exemption so that
when the property is determined to be not taxable it shall be dropped
from the assessment roll.

Apparently, petitioner did not apply for an exemption of its real

properties despite the issuance of the OGCC opinion as early as May 29,

7
G.R. No. 155650 July 20, 2006
8
G.R. No.181756 June 15, 2015
9
G.R. No. 191109 July 18, 2015

8
2007 stating that petitioner is a government instrumentality and
exempt from the payment of Real Property Tax. Meanwhile its
properties remained in the assessment roll as taxable. Petitioner merely
relied on the opinion of the OGCC which is not infallible.

An example is the case of MIAA vs. CA10 cited by petitioner

wherein the OGCC issued an opinion stating that the Local Government
Code of 1991 withdrew the real property tax exemption granted to
MIAA through its franchise. As a result, MIAA negotiated and even paid
for the real property taxes already due to the City of Paranaque only to
be declared by the Supreme Court exempt being a government
instrumentality vested with corporate powers.

There is no grave abuse of discretion on the part of respondent as

it only performs its mandate under the Local Government Code. Grave
abuse of discretion has been defined as a "capricious or whimsical
exercise of judgment that is patent and gross as to amount to an evasion
of positive duty or a virtual refusal to perform a duty enjoined by law.11
Petitioner

Mere reliance of respondent to its authority to levy real property

tax on the properties of petitioner cannot be considered as Grave Abuse
of Discretion since it was not in any way arbitrary, and in a despotic
manner, due to passion or prejudice or personal hostility.

PETITIONER IS NOT ENTITLED TO A TEMPORARY RESTRAINING

ORDER (TRO) AND/OR WRIT OF PRELIMINARY INJUNCTION

Petitioner alleges that they are entitled to a writ of preliminary

injunction because they were able to establish that they have a clear and
unmistakable right to be exempt from the payment of realty tax being a
government instrumentality, that there is a material and substantial
invasion of such right when respondent issued the subject notices of
delinquencies, that there is an urgent need for the writ to prevent
irreparable injury to the applicant; and that there is no other ordinary,
speedy and adequate remedy exists to prevent the infliction of the
irreparable injury. In support petitioner cited the case of St. James
College of Paranaque vs. Equitable PCI Bank12

However, what petitioner failed to mention is that in said case

there was already a foreclosure sale and even in the cases of Ty vs.
Trampe, City Government of Quezon City vs. Bayantel and Talento
vs. Escalada, a warrants of levy and notices of public auction were

10
G.R. No. 155650 July 20, 2006
11
Cruz vs. People, G.R. 224974, July 3, 2017
12
G.R. No. 179441, August 9, 2010

9
already issued necessitating the extraordinary remedy sought for. The
cases mentioned find no application in the instant case because while
Notices of Delinquency were already issued petitioner, the same is not
yet final. In fact the tenor of the notice signifies the intention of
respondent to give petitioner ample chance to correct the computations
made by respondent within 15 days from receipt of the same.

In fact the same case of St. James College of Paranaque vs.

Equitable PCI Bank, the court ruled as follows:

“For sure, the Court is aware that the matter of the

propriety of the issuance of a writ of preliminary injunction is
addressed to the sound discretion of the trial court. It bears to
stress, however, that the injunctive writ is conditioned on the
existence of a clear and positive right of the applicant which
should be protected, the writ being the strong arm of equity, an
extraordinary peremptory remedy which can be availed of only
upon the existence of well-defined circumstances. Be that as it
may, the writ must be used with extreme caution, affecting as it
does the respective rights of the parties. In fine, the writ should
be granted only when the court is fully satisfied that the law
permits it and the emergency demands it, for the very
foundation of the jurisdiction to issue writ of injunction rests in
the existence of a cause of action, probability of irreparable
injury, inadequacy of pecuniary compensation, and the
prevention of the multiplicity of suits. Where facts are not
shown to bring the case within these conditions, the relief of
injunction should be refused. (Emphasis supplied)

FAILURE TO APPEAL THE ASSESSMENT WITHIN 60 DAYS FROM THE

RECEIPT OF THE NOTICE OF ASSESSMENT.

Moreover, without waiting for respondent to take action on their

letter dated July 19, 2018 claiming exemption, petitioner immediately
sought the intervention of this honorable court in violation of the
principle of exhaustion of administrative remedies.

Under the doctrine of exhaustion of administrative remedies,

before a party is allowed to seek the intervention of the court, he or she
should have availed himself or herself of all the means of administrative
processes afforded him or her. Hence, if resort to a remedy within the
administrative machinery can still be made by giving the administrative
officer concerned every opportunity to decide on a matter that comes
within his or her jurisdiction, then such remedy should be exhausted
first before the court's judicial power can be sought. The premature
invocation of the intervention of the court is fatal to one’s cause of
action. The doctrine of exhaustion of administrative remedies is based

10
on practical and legal reasons. The availment of administrative remedy
entails lesser expenses and provides for a speedier disposition of
controversies. Furthermore, the courts of justice, for reasons of comity
and convenience, will shy away from a dispute until the system of
administrative redress has been completed and complied with, so as to
give the administrative agency concerned every opportunity to correct
its error and dispose of the case.13

It must be noted however that petitioner has been delinquent in

the payment of realty tax on its properties since 2008 and respondent
has been issuing notices annually but have not issued any warrant of
levy on its properties until now. Thus, the allegation of continuous
threat is unfounded, highly presumptuous and anticipatory. Considering
that there is no act to be injunctioned yet, it follows that petitioner is not
entitled to a TRO and or writ of preliminary injunction.

WHEREFORE premises considered and in light of the foregoing it

is most respectfully prayed unto this Honorable Court that the Petition
for Prohibition be dismissed and the prayer for the issuance of TRO or a
Writ of Preliminary Injunction be denied.

Prays for other reliefs just and equitable under the premises.

Digos, Davao del Sur. December 27, 2018

by:

ATTY. EINSTIEN GARRY R. TAGHOY

Counsel for Respondent
Roll No. 49914 admitted to the Bar on ___________
PTR No. ____________/____________
IBP No. _______________/_____________
MCLE Compliance No. VI – 0000_______ valid until April 14, 2022

Copy furnished:

NATIONAL FOOD AUTHORITY

13
Maglalang vs. PAGCOR, G.R. No. 190566 December 11, 2013

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Office of the Government Corporate Counsel
SRA Bldg. Annex 2, PHILSUGIN Center, North Avenue
Diliman, Quezon City

EXPLANATION

Copies hereof are served to the Office of the Government

Corporate Counsel through their address indicated above through
registered mail due to distance and for practical reasons.

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