Case Digest: Province of Abra v. Hernando 107 SCRA 104 (1981)

Taxation

  • Facts: 

    • The Roman Catholic Bishop of Bangued filed an action for declaratory relief seeking exemption from real property tax on certain church-owned properties assessed by the Province of Abra.

    • The Province of Abra filed a motion to dismiss, arguing that declaratory relief was improper because a tax assessment had already been made and that administrative remedies under Presidential Decree No. 464 had not been exhausted.

    • Despite the motion to dismiss, the trial court denied it and immediately rendered summary judgment granting tax exemption to the Bishop without requiring the Province to file an answer or conducting a hearing.

    • The Province of Abra filed a petition for certiorari and mandamus, alleging that the trial judge violated procedural rules and denied it due process by summarily deciding the case.

  • Issue: 

    • Whether the trial court committed grave abuse of discretion by granting tax exemption without hearing and without requiring proof that the properties were actually, directly, and exclusively used for religious or charitable purposes as required by the Constitution.

  • Ruling: 

    • The Supreme Court held that the trial court gravely abused its discretion and violated procedural due process by deciding the case without hearing the Province of Abra.

    • The Court emphasized that under the present Constitution, tax exemption for religious properties requires proof of actual, direct, and exclusive use for religious or charitable purposes, unlike the broader language of the 1935 Constitution.

    • The Court reiterated that tax exemptions are strictly construed against the taxpayer and are never presumed, requiring clear and convincing proof of compliance with constitutional requirements.

    • The Court ruled that the trial judge erred in merely accepting the allegations of the Bishop without evidence and in ignoring the procedural requirement that tax assessments must first be contested through administrative remedies.

    • Accordingly, the petition was granted, the summary judgment was set aside, and the case was ordered to proceed in accordance with due process.

The Roman Catholic Bishop of Bangued sought exemption from real property taxes, which the trial court granted outright through summary judgment without hearing the Province of Abra or requiring proof of actual use. The Supreme Court ruled that this violated due process and held that tax exemption for religious property must be strictly proven through evidence showing actual, direct, and exclusive religious use under the Constitution.


FERNANDO, C.J.:


On the face of this certiorari and mandamus petition filed by the Province of Abra, it clearly appears that the actuation of respondent Judge Harold M. Hernando of the Court of First Instance of Abra left much to be desired. 


First, there was a denial of a motion to dismiss an action for declaratory relief by private respondent Roman Catholic Bishop of Bangued desirous of being exempted from a real estate tax followed by a summary judgment granting such exemption, without even hearing the side of petitioner. 


In the rather vigorous language of the Acting Provincial Fiscal, as counsel for petitioner, respondent Judge "virtually ignored the pertinent provisions of the Rules of Court; ... wantonly violated the rights of petitioner to due process, by giving due course to the petition of private respondent for declaratory relief, and thereafter without allowing petitioner to answer and without any hearing, adjudged the case; all in total disregard of basic laws of procedure and basic provisions of due process in the constitution, thereby indicating a failure to grasp and understand the law, which goes into the competence of the Honorable Presiding Judge."


It was the submission of counsel that an action for declaratory relief would be proper only before a breach or violation of any statute, executive order or regulation. Moreover, there being a tax assessment made by the Provincial Assessor on the properties of respondent Roman Catholic Bishop, petitioner failed to exhaust the administrative remedies available under Presidential Decree No. 464 before filing such court action. 


Further, it was pointed out to respondent Judge that he failed to abide by the pertinent provision of such Presidential Decree which provides as follows: "No court shall entertain any suit assailing the validity of a tax assessed under this Code until the taxpayer, shall have paid, under protest, the tax assessed against him nor shall any court declare any tax invalid by reason of irregularities or informalities in the proceedings of the officers charged with the assessment or collection of taxes, or of failure to perform their duties within this time herein specified for their performance unless such irregularities, informalities or failure shall have impaired the substantial rights of the taxpayer; nor shall any court declare any portion of the tax assessed under the provisions of this Code invalid except upon condition that the taxpayer shall pay the just amount of the tax, as determined by the court in the pending proceeding."


When asked to comment, respondent Judge began with the allegation that there "is no question that the real properties sought to be taxed by the Province of Abra are properties of the respondent Roman Catholic Bishop of Bangued, Inc."


The very next sentence assumed the very point it asked when he categorically stated: "Likewise, there is no dispute that the properties including their procedure are actually, directly and exclusively used by the Roman Catholic Bishop of Bangued, Inc. for religious or charitable purposes."For him then: "The proper remedy of the petitioner is appeal and not this special civil action."


A more exhaustive comment was submitted by private respondent Roman Catholic Bishop of Bangued, Inc. It was, however, unable to lessen the force of the objection raised by petitioner Province of Abra, especially the due process aspect. it is to be admitted that his opposition to the petition, pressed with vigor, ostensibly finds a semblance of support from the authorities cited. It is thus impressed with a scholarly aspect. It suffers, however, from the grave infirmity of stating that only a pure question of law is presented when a claim for exemption is made.


The petition must be granted.


1. Respondent Judge would not have erred so grievously had he merely compared the provisions of the present Constitution with that appearing in the 1935 Charter on the tax exemption of "lands, buildings, and improvements." There is a marked difference. 


Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation."


The present Constitution added "charitable institutions, mosques, and non-profit cemeteries" and required that for the exemption of ":lands, buildings, and improvements," they should not only be "exclusively" but also "actually" and "directly" used for religious or charitable purposes.


The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have sufficed were the words "actually" as well as "directly" not added. 


There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation.


According to Commissioner of Internal Revenue v. Guerrero:  "From 1906, in Catholic Church v. Hastings to 1966, in Esso Standard Eastern, Inc. v. Acting Commissioner of Customs, it has been the constant and uniform holding that exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. 


Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi juris."


In Manila Electric Company v. Vera, a 1975 decision, such principle was reiterated, reference being made to Republic Flour Mills, Inc. v. Commissioner of Internal Revenue; Commissioner of Customs v. Philippine Acetylene Co. & CTA; and Davao Light and Power Co., Inc. v. Commissioner of Customs.


2. Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural due process.


If there is any case where proof is necessary to demonstrate that there is compliance with the constitutional provision that allows an exemption, this is it. 


Instead, respondent Judge accepted at its face the allegation of private respondent. All that was alleged in the petition for declaratory relief filed by private respondents, after mentioning certain parcels of land owned by it, are that they are used "actually, directly and exclusively" as sources of support of the parish priest and his helpers and also of private respondent Bishop.


In the motion to dismiss filed on behalf of petitioner Province of Abra, the objection was based primarily on the lack of jurisdiction, as the validity of a tax assessment may be questioned before the Local Board of Assessment Appeals and not with a court. There was also mention of a lack of a cause of action, but only because, in its view, declaratory relief is not proper, as there had been breach or violation of the right of government to assess and collect taxes on such property. 


It clearly appears, therefore, that in failing to accord a hearing to petitioner Province of Abra and deciding the case immediately in favor of private respondent, respondent Judge failed to abide by the constitutional command of procedural due process.


WHEREFORE, the petition is granted and the resolution of June 19, 1978 is set aside. Respondent Judge, or who ever is acting on his behalf, is ordered to hear the case on the merit. No costs.

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