MANILA ELECTRIC CO. V. CITY ASSESSOR, G.R. NO.

166102, [AUGUST 5, 2015]

On February 20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax Declaration
No. 019-6500 covering the following electric facilities, classified as capital investment, of the company:
(a) transformer and electric post; (b) transmission line; (c) insulator; and (d) electric meter, located in
Quezon Ave. Ext., Brgy. Gulang-Gulang, Lucena City. Under Tax Declaration No. 019-6500, these electric
facilities had a market value of P81,811,000.00 and an assessed value of P65,448,800.00, and were
subjected to real property tax as of 1985. 

MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of Lucena City, which was docketed
as LBAA-89-2. MERALCO claimed that its capital investment consisted only of its substation facilities, the
true and correct value of which was only P9,454,400.00; and that MERALCO was exempted from
payment of real property tax on said substation facilities.

The LBAA rendered a Decision in LBAA-89-2 on July 5, 1989, finding that under its franchise, MERALCO
was required to pay the City Government of Lucena a tax equal to 5% of its gross earnings, and “[s]aid
tax shall be due and payable quarterly and shall be in lieu of any and all taxes of any kind, nature, or
description levied, established, or collected . . ., on its poles, wires, insulators, transformers and
structures, installations, conductors, and accessories, . . ., from which taxes the grantee (MERALCO) is
hereby expressly exempted.” As regards the issue of whether or not the poles, wires, insulators,
transformers, and electric meters of MERALCO were real properties, the LBAA cited the 1964 case
of Board of Assessment Appeals v. Manila Electric Company (1964 MERALCO case) in which the Court
held that: (1) the steel towers fell within the term “poles” expressly exempted from taxes under the
franchise of MERALCO; and (2) the steel towers were personal properties under the provisions of
the Civil Code and, hence, not subject to real property tax. The LBAA lastly ordered that Tax Declaration
No. 019-6500 would remain and the poles, wires, insulators, transformers, and electric meters of
MERALCO would be continuously assessed, but the City Assessor would stamp on the said Tax
Declaration the word “exempt.

ISSUES:

A. WON MERALCO PROPERLY POSTED A BOND.

B. WON MERALCO IS SUBJECT TO REAL PROPERTY TAX.

C. WON THE ASSESSMENT MADE BY THE CITY ASSESSOR IS NULL AND VOID.

HELD: 

A. YES. Section 252 of the Local Government Code mandates that “[n]o protest shall be entertained
unless the taxpayer first pays the tax.” It is settled that the requirement of “payment under protest” is a
condition sine qua non before an appeal may be entertained. Section 231 of the same Code also dictates
that “[a]ppeal on assessments of real property . . . shall, in no case, suspend the collection of the
corresponding realty taxes on the property involved as assessed by the provincial or city assessor,
without prejudice to subsequent adjustment depending upon the final outcome of the appeal.” Clearly,
under the Local Government Code, even when the assessment of the real property is appealed, the real
property tax due on the basis thereof should be paid to and/or collected by the local government unit
concerned.

In the case at bar, the City Treasurer of Lucena, in his letter dated October 16, 1997, sought to collect
from MERALCO the amount of P17,925,117.34 as real property taxes on its machineries, plus penalties,
for the period of 1990 to 1997, based on Tax Declaration Nos. 019-6500 and 019-7394 issued by the City
Assessor of Lucena. MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 with the LBAA, but
instead of paying the real property taxes and penalties due, it posted a surety bond in the amount of
P17,925,117.34.

By posting the surety bond, MERALCO may be considered to have substantially complied with Section
252 of the Local Government Code for the said bond already guarantees the payment to the Office of
the City Treasurer of Lucena of the total amount of real property taxes and penalties due on Tax
Declaration Nos. 019-6500 and 019-7394. This is not the first time that the Court allowed a surety bond
as an alternative to cash payment of the real property tax before protest/appeal as required by Section
252 of the Local Government Code. In Camp John Hay Development Corporation v. Central Board of
Assessment Appeals, the Court affirmed the ruling of the CBAA and the Court of Tax Appeals en
banc applying the “payment under protest” requirement in Section 252 of the Local Government
Code and remanding the case to the LBAA for “further proceedings subject to a full and up-to-date
payment, either in cash or surety, of realty tax on the subject properties . . . .”

Accordingly, the LBAA herein correctly took cognizance of and gave due course to the appeal of Tax
Declaration Nos. 019-6500 and 019-7394 filed by MERALCO.

B. YES. The last paragraph of Section 234 had unequivocally withdrawn, upon the effectivity of the Local
Government Code, exemptions from payment of real property taxes granted to natural or juridical
persons, including government-owned or controlled corporations, except as provided in the same
section.

MERALCO, a private corporation engaged in electric distribution, and its transformers, electric posts,
transmission lines, insulators, and electric meters used commercially do not qualify under any of the
ownership, character, and usage exemptions enumerated in Section 234 of the Local Government Code.
It is a basic precept of statutory construction that the express mention of one person, thing, act, or
consequence excludes all others as expressed in the familiar maximexpressio unius est exclusio alterius. 
Not being among the recognized exemptions from real property tax in Section 234 of the Local
Government Code, then the exemption of the transformers, electric posts, transmission lines, insulators,
and electric meters of MERALCO from real property tax granted under its franchise was among the
exemptions withdrawn upon the effectivity of the Local Government Code on January 1, 1998.

It is worthy to note that the subsequent franchises for operation granted to MERALCO, i.e., under the
Certificate of Franchise dated October 28, 1993 issued by the National Electrification Commission
and Republic Act No. 9209 enacted on June 9, 2003 by Congress, are completely silent on the matter of
exemption from real property tax of MERALCO or any of its properties.

It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption
must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption
from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer.
MERALCO has failed to present herein any express grant of exemption from real property tax of its
transformers, electric posts, transmission lines, insulators, and electric meters that is valid and binding
even under the Local Government Code. c

C. YES. The Court cannot help but attribute the lack of a valid notice of assessment to the apparent lack
of a valid appraisal and assessment conducted by the City Assessor of Lucena in the first place. It
appears that the City Assessor of Lucena simply lumped together all the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO located in Lucena City under Tax
Declaration Nos. 019-6500 and 019-7394, contrary to the specificity demanded under Sections 224 and
225 of the Local Government Code for appraisal and assessment of machinery. The City Assessor and
the City Treasurer of Lucena did not even provide the most basic information such as the number of
transformers, electric posts, insulators, and electric meters or the length of the transmission lines
appraised and assessed under Tax Declaration Nos. 019-6500 and 019-7394. There is utter lack of factual
basis for the assessment of the transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO.The Court of Appeals laid the blame on MERALCO for the lack of information
regarding its transformers, electric posts, transmission lines, insulators, and electric meters for appraisal
and assessment purposes because MERALCO failed to file a sworn declaration of said properties as
required by Section 202 of the Local Government Code. As MERALCO explained, it cannot be expected
to file such a declaration when all the while it believed that said properties were personal or movable
properties not subject to real property tax.