G.R. No. 51593 November 5, 1992
NATIONAL DEVELOPMENT COMPANY, plaintiff-appellee, vs. CEBU CITY and AUGUSTO PACIS as Treasurer of Cebu City, defendant-appellants.

FACTS

The National Development Company (NDC), a government-owned or controlled corporation (GOCC), is the plaintiff-appellee. On August 10, 1939, the President issued Proclamation No. 430 reserving a parcel of land in Cebu City for warehousing purposes under the administration of the National Warehousing Corporation (NWC), a subsidiary of NDC. A warehouse was constructed on the land in 1940. Executive Order No. 93 dissolved NWC in 1947, with NDC taking over its assets and functions. Commencing in 1948, Cebu City assessed and collected real estate taxes from NDC for the land and warehouse. By the first quarter of 1970, NDC had paid a total of P100,316.31, of which only P3,895.06 was paid under protest. On March 20, 1970, NDC demanded a full refund from the City Assessor, claiming the properties belonged to the Republic and were thus tax-exempt. Cebu City refused, leading NDC to file a suit on October 25, 1972, in the Court of First Instance of Manila. The trial court ruled in favor of NDC, ordering Cebu City to refund taxes paid from and after October 25, 1966. Cebu City appealed, and the case was certified to the Supreme Court.

ISSUE

The principal issues are: (1) Whether the land reserved by the President for warehousing purposes and the warehouse erected thereon are exempt from real property tax; and (2) Whether NDC may recover a refund for the unprotested real estate taxes it paid from 1948 to 1970.

RULING

The Supreme Court ruled against NDC. On the first issue, the Court held that the properties were not exempt from real estate tax. The exemption under Section 3(a) of the Assessment Law applies only to property owned by the Republic of the Philippines or its political subdivisions. NDC, as a GOCC with a separate and distinct juridical personality, owns the properties in question, not the Republic itself. The Court distinguished this case from Board of Assessment Appeals v. CTA & NWSA, where the properties were stipulated as owned by the Government. Here, no such stipulation existed. The Court cited National Development Co. v. Province of Nueva Ecija, which held that NDC, as a corporate entity performing proprietary functions, is subject to taxation, and its properties are not covered by the exemption for government-owned property. On the second issue, the Court held that NDC could not recover the unprotested taxes. Under the relevant tax laws (Section 54 of the Assessment Law and Section 75 of Republic Act No. 3857 ), a taxpayer must pay under protest to challenge a tax assessment. Since NDC paid the bulk of the taxes without protest, it was barred from seeking their refund. The claim for refund of unprotested payments constituted a suit to impeach the tax without the requisite protest, which the law prohibits. The decision of the trial court was reversed.