CASE DIGEST : Metropolitan Waterworks and Sewerage System v. Central Board of Assessment Appeals G.R. No. 215955 January 13, 2021

 

FACTS

The Metropolitan Waterworks and Sewerage System (MWSS), a government-owned and controlled corporation created under Republic Act No. 6234, was granted tax exemptions, including exemption from real property tax (RPT), over properties used in carrying out its governmental functions. Following the privatization of its water distribution operations through concession agreements with private concessionaires, the Pasay City Assessor and Treasurer assessed and collected RPT on MWSS properties. MWSS contested the assessments, arguing that its tax exemption under its charter remained in force and that the Local Government Code (LGC) did not expressly repeal such exemption.

Instead of pursuing the administrative remedies before the Local Board of Assessment Appeals (LBAA) and the Central Board of Assessment Appeals (CBAA), MWSS filed a petition directly before the Regional Trial Court, asserting that the issue involved was purely legal—whether the local government had authority under the Local Government Code (Republic Act No. 7160) to assess and collect RPT against a government entity enjoying a statutory tax exemption. The lower courts dismissed the petition for failure to exhaust administrative remedies, prompting MWSS to elevate the matter to the Supreme Court.

ISSUE

Whether MWSS was required to exhaust the administrative remedies under the Local Government Code, particularly the appeal process before the LBAA and CBAA, before questioning the real property tax assessment.

Whether MWSS remained exempt from real property tax under Republic Act No. 6234, notwithstanding the enactment of the Local Government Code and the privatization of its water distribution operations.

HELD

The Supreme Court granted the petition. It held that the doctrine of exhaustion of administrative remedies did not apply because the controversy involved a pure question of law—whether the City Assessor and City Treasurer possessed the legal authority to assess and collect real property taxes from MWSS. Under the Local Government Code, the jurisdiction of the LBAA and CBAA is limited to questions involving the correctness or reasonableness of property assessments, not the legal authority of the taxing officials. Consistent with Ty v. Trampe, when only legal issues are involved, direct recourse to the courts is proper.

The Court further ruled that MWSS continued to enjoy its real property tax exemption under Republic Act No. 6234, as such exemption was not expressly withdrawn by the Local Government Code. The privatization of MWSS operations did not divest it of its status as a government instrumentality nor automatically remove the statutory exemption covering its properties devoted to public service. Consequently, the Pasay City officials had no authority to assess and collect real property taxes against the exempt MWSS properties, rendering the assessments void