G.R. No. L-20654 December 24, 1964
MARCELINO M. FRANCISCO and CLARA C. FRANCISCO, plaintiffs-appellees, vs. THE CITY OF DAVAO, TELESFORO ALFELOR, City Assessor of Davao, and SIMPLICIO MONTANO, City Treasurer of Davao, defendant-appellants.

FACTS

On July 5, 1950, the Bureau of Lands awarded Lot No. 129-A of the Santa Ana Reservation, Davao City, to plaintiff Clara C. Francisco as the highest bidder at a public auction. The award required payment of the purchase price of P2.50 per square meter in ten annual installments over ten years, which she began paying in July 1951. In 1955, while the title to the property remained with the Government, the City Assessor of Davao assessed the lot for real estate tax purposes at P8.28 per square meter. Mrs. Francisco protested this assessment, arguing it should not exceed her purchase price. Despite her pending protest before the City Board of Assessment Appeals and her offer to pay taxes based on the P2.50 price, the City Treasurer demanded payment based on the protested assessment. Consequently, on May 20, 1955, she paid P47.99 under protest and, with her husband, filed an action seeking a declaration of the assessment’s illegality, an order for the City Assessor to assess according to Section 115 of Commonwealth Act No. 141 (as amended), a declaration of the tax collection as illegal, and a refund. The defendants contended the assessment was valid and that the tax collected (excluding penalties) was P38.70. The Court of First Instance of Davao ruled the land was not taxable at all and ordered a refund. The defendants appealed.

ISSUE

Whether the City of Davao may legally assess and collect real estate taxes on a public land awarded to a grantee under Commonwealth Act No. 141 while title remains with the State, and if so, on what valuation basis.

RULING

Yes, the City of Davao may assess and collect real estate taxes on the public land even while title remains with the State, but the assessment must be based on the value fixed in the grant contract, not an arbitrary higher value. The lower court’s decision is reversed.
The Supreme Court held that Section 24 of the Davao City Charter (Commonwealth Act No. 51), which outlines the City Assessor’s duties to list “taxable real property” and its “owners,” does not define or limit the city’s taxing power. The city’s power to levy real property taxes is conferred by Section 14(a) of its Charter, which authorizes taxation “in accordance with law.” For public lands granted under Commonwealth Act No. 141 (the Public Land Act), the governing law is Section 115, as amended. This section explicitly subjects such lands to ordinary taxes “even though and while the title remains in the State,” beginning the year after the contract is signed, and mandates taxation “on the basis of the value fixed in such… contract.” Therefore, the land is taxable, contrary to the trial court’s conclusion.
The Court further clarified that Section 26 of the Davao City Charter, which exempts properties of the Government from taxation, must yield to Section 115 of Commonwealth Act No. 141, as the latter is a subsequent legislation reflecting a specific government policy regarding public lands.
Since the assessment of P8.28 per square meter exceeded the contract price of P2.50 per square meter, the tax collected based on that excessive assessment was illegal to that extent. The defendants were ordered to refund the excess amount paid by the plaintiffs. The Court also addressed procedural concerns, noting that while the plaintiffs might have pursued remedies under Republic Act No. 1125 (creating the Court of Tax Appeals), dismissing the case after nine years to restart proceedings would not serve the ends of justice, especially given the clear legal violation.