G.R. No. 90639 February 21, 1990
TESTATE ESTATE OF CONCORDIA T. LIM, plaintiff-appellant, vs. CITY OF MANILA, JESUS I. CALLEJA, in his capacity as City Treasurer of Manila, NICOLAS CATIIL, in his capacity as City Assessor of Manila, and/or GOVERNMENT SERVICE INSURANCE SYSTEM, defendants-appellees.

FACTS

The late Concordia Lim obtained a loan from the GSIS, secured by a mortgage on two parcels of land with a building in Manila. Upon default, the GSIS extrajudicially foreclosed the mortgage, purchased the properties at auction in 1977, and consolidated title after Lim’s estate failed to redeem. In 1979, pursuant to a GSIS Board Resolution, the estate’s administratrix was allowed to repurchase the properties via a Deed of Absolute Sale. Before transferring the titles, the City Treasurer required the estate to pay real estate taxes for 1977, 1978, and the first quarter of 1979, totaling P67,960.39. The estate paid this amount under protest.
The estate then demanded reimbursement from GSIS and a refund from the City Treasurer, both of which were refused. Consequently, the estate filed an action for sum of money for refund or reimbursement. During the trial, it was admitted that the estate had subsequently sold the repurchased properties to another person. The Regional Trial Court dismissed the complaint, citing lack of jurisdiction for failure to exhaust administrative remedies by first appealing to the Local Board of Assessment Appeals. It also opined, citing City of Baguio v. Busuego, that the tax liability had attached and that the estate assumed such liability under a clause in the Deed of Sale with GSIS.

ISSUE

The primary issues were: (1) whether the trial court had jurisdiction over the action for refund of real estate taxes paid under protest; (2) whether the plaintiff-appellant had the right to recover the taxes paid; and (3) whether the plaintiff-appellant had the personality to sue.

RULING

The Supreme Court reversed the trial court’s decision. On jurisdiction, the Court held that payment under protest under Section 62 of P.D. No. 464 (the Real Property Tax Code) is a condition precedent for filing a judicial action for refund. The estate complied with this requirement, thereby vesting jurisdiction in the trial court. The doctrine of exhaustion of administrative remedies was inapplicable as the protest was against the collection of the tax, not the assessment, making a judicial action proper.
On the right to recover, the Court ruled the estate was entitled to a refund from the City of Manila. The real property tax for the contested periods should be levied on the taxable person with beneficial use and possession. During 1977 to early 1979, title and ownership were vested in GSIS, a government-owned corporation exempt from real property tax under its charter. While Section 40(a) of P.D. No. 464 provides that such exemption does not apply if the beneficial use is granted to a taxable person, the liability for the tax, based on “actual use,” would fall on the lessees, not on GSIS as the owner, and certainly not on Lim’s estate, which had no beneficial use during that period. The estate’s payment under the repurchase agreement did not make it the liable taxpayer under the law.
On personality to sue, the Court found the trial court’s reasoning—that the subsequent sale transferred any right of action to the new buyer—unsupported by evidence. The estate, as the party who paid the tax under protest, remained the real party in interest entitled to seek a refund. Consequently, the Court ordered the City of Manila, its Treasurer, and Assessor to refund the amount of P67,960