EN BANC
G.R. No. 163072 April 2, 2009MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner,
vs.
CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, Respondents.
D E C I S I O N
CARPIO, J.:
This is a petition for review on certiorari1 of the Decision2 dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416.
The Facts
Petitioner Manila International Airport Authority
(MIAA) operates and administers the Ninoy Aquino International Airport
(NAIA) Complex under Executive Order No. 903 (EO 903),3
otherwise known as the Revised Charter of the Manila International
Airport Authority. EO 903 was issued on 21 July 1983 by then President
Ferdinand E. Marcos. Under Sections 34 and 225
of EO 903, approximately 600 hectares of land, including the runways,
the airport tower, and other airport buildings, were transferred to
MIAA. The NAIA Complex is located along the border between Pasay City
and Parañaque City.
On 28 August 2001, MIAA received Final Notices of
Real Property Tax Delinquency from the City of Pasay for the taxable
years 1992 to 2001. MIAA’s real property tax delinquency for its real
properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City
(NAIA Pasay properties) is tabulated as follows:
| TAX DECLA-RATION | TAXABLE YEAR | TAX DUE | PENALTY | TOTAL |
| A7-183-08346 | 1997-2001 | 243,522,855.00 | 123,351,728.18 | 366,874,583.18 |
| A7-183-05224 | 1992-2001 | 113,582,466.00 | 71,159,414.98 | 184,741,880.98 |
| A7-191-00843 | 1992-2001 | 54,454,800.00 | 34,115,932.20 | 88,570,732.20 |
| A7-191-00140 | 1992-2001 | 1,632,960.00 | 1,023,049.44 | 2,656,009.44 |
| A7-191-00139 | 1992-2001 | 6,068,448.00 | 3,801,882.85 | 9,870,330.85 |
| A7-183-05409 | 1992-2001 | 59,129,520.00 | 37,044,644.28 | 96,174,164.28 |
| A7-183-05410 | 1992-2001 | 20,619,720.00 | 12,918,254.58 | 33,537,974.58 |
| A7-183-05413 | 1992-2001 | 7,908,240.00 | 4,954,512.36 | 12,862,752.36 |
| A7-183-05412 | 1992-2001 | 18,441,981.20 | 11,553,901.13 | 29,995,882.33 |
| A7-183-05411 | 1992-2001 | 109,946,736.00 | 68,881,630.13 | 178,828,366.13 |
| A7-183-05245 | 1992-2001 | 7,440,000.00 | 4,661,160.00 | 12,101,160.00 |
| GRAND TOTAL | ||||
On 24 August 2001, the City of Pasay, through its
City Treasurer, issued notices of levy and warrants of levy for the NAIA
Pasay properties. MIAA received the notices and warrants of levy on 28
August 2001. Thereafter, the City Mayor of Pasay threatened to sell at
public auction the NAIA Pasay properties if the delinquent real property
taxes remain unpaid.
On 29 October 2001, MIAA filed with the Court of
Appeals a petition for prohibition and injunction with prayer for
preliminary injunction or temporary restraining order. The petition
sought to enjoin the City of Pasay from imposing real property taxes on,
levying against, and auctioning for public sale the NAIA Pasay
properties.
On 30 October 2002, the Court of Appeals dismissed
the petition and upheld the power of the City of Pasay to impose and
collect realty taxes on the NAIA Pasay properties. MIAA filed a motion
for reconsideration, which the Court of Appeals denied. Hence, this
petition.
The Court of Appeals’ Ruling
The Court of Appeals held that Sections 193 and 234
of Republic Act No. 7160 or the Local Government Code, which took effect
on 1 January 1992, withdrew the exemption from payment of real property
taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except local water
districts, cooperatives duly registered under Republic Act No. 6938,
non-stock and non-profit hospitals and educational institutions. Since
MIAA is a government-owned corporation, it follows that its tax
exemption under Section 21 of EO 903 has been withdrawn upon the
effectivity of the Local Government Code.
The Issue
The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax.
The Court’s Ruling
The petition is meritorious.
In ruling that MIAA is not exempt from paying real
property tax, the Court of Appeals cited Sections 193 and 234 of the
Local Government Code which read:
SECTION 193. Withdrawal of Tax Exemption Privileges.
– Unless otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except
local water districts, cooperatives duly registered under R.A. No.
6938, non-stock and non-profit hospitals and educational institutions,
are hereby withdrawn upon the effectivity of this Code.
SECTION 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise
to a taxable person;
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or religious
cemeteries and all lands, buildings and improvements actually, directly,
and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts and government
owned or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environment protection.
Except as provided herein, any exemption from payment
of real property tax previously granted to, or presently enjoyed by,
all persons, whether natural or juridical, including all
government-owned or controlled corporations are hereby withdrawn upon
the effectivity of this Code.
The Court of Appeals held that as a government-owned
corporation, MIAA’s tax exemption under Section 21 of EO 903 has already
been withdrawn upon the effectivity of the Local Government Code in
1992.
In Manila International Airport Authority v. Court of Appeals6
(2006 MIAA case), this Court already resolved the issue of whether the
airport lands and buildings of MIAA are exempt from tax under existing
laws. The 2006 MIAA case originated from a petition for prohibition and
injunction which MIAA filed with the Court of Appeals, seeking to
restrain the City of Parañaque from imposing real property tax on,
levying against, and auctioning for public sale the airport lands and
buildings located in Parañaque City. The only difference between the
2006 MIAA case and this case is that the 2006 MIAA case involved airport
lands and buildings located in Parañaque City while this case involved
airport lands and buildings located in Pasay City. The 2006 MIAA case
and this case raised the same threshold issue: whether the local
government can impose real property tax on the airport lands, consisting
mostly of the runways, as well as the airport buildings, of MIAA. In
the 2006 MIAA case, this Court held:
To summarize, MIAA is not a government-owned or
controlled corporation under Section 2(13) of the Introductory
Provisions of the Administrative Code because it is not organized as a
stock or non-stock corporation. Neither is MIAA a government-owned or
controlled corporation under Section 16, Article XII of the 1987
Constitution because MIAA is not required to meet the test of economic
viability. MIAA is a government instrumentality vested with corporate
powers and performing essential public services pursuant to Section
2(10) of the Introductory Provisions of the Administrative Code. As a
government instrumentality, MIAA is not subject to any kind of tax by
local governments under Section 133(o) of the Local Government Code. The
exception to the exemption in Section 234(a) does not apply to MIAA
because MIAA is not a taxable entity under the Local Government Code.
Such exception applies only if the beneficial use of real property owned
by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
The term "ports x x x constructed by the State" includes airports
and seaports. The Airport Lands and Buildings of MIAA are intended for
public use, and at the very least intended for public service. Whether
intended for public use or public service, the Airport Lands and
Buildings are properties of public dominion. As properties of
public dominion, the Airport Lands and Buildings are owned by the
Republic and thus exempt from real estate tax under Section 234(a) of
the Local Government Code.7 (Emphasis in the original)
The definition of "instrumentality" under
Section 2(10) of the Introductory Provisions of the Administrative Code
of 1987 uses the phrase "includes x x x government-owned or controlled
corporations" which means that a government "instrumentality" may or may
not be a "government-owned or controlled corporation." Obviously, the
term government "instrumentality" is broader than the term "government-owned or controlled corporation." Section 2(10) provides:
SEC. 2. General Terms Defined.– x x x
(10) Instrumentality refers to any agency of
the national Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some
if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government-owned or
controlled corporations.
The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the Introductory Provisions of the Administrative Code of 1987:
SEC. 2. General Terms Defined.– x x x
(13) Government-owned or controlled corporation refers
to any agency organized as a stock or non-stock corporation, vested
with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through
its instrumentalities either wholly, or, where applicable as in the case
of stock corporations, to the extent of at least fifty-one (51) percent
of its capital stock: Provided, That government-owned or
controlled corporations may further be categorized by the department of
Budget, the Civil Service Commission, and the Commission on Audit for
the purpose of the exercise and discharge of their respective powers,
functions and responsibilities with respect to such corporations.
The fact that two terms have separate definitions
means that while a government "instrumentality" may include a
"government-owned or controlled corporation," there may be a government
"instrumentality" that will not qualify as a "government-owned or
controlled corporation."
A close scrutiny of the definition of
"government-owned or controlled corporation" in Section 2(13) will show
that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case:
A government-owned or controlled corporation must be
"organized as a stock or non-stock corporation." MIAA is not organized
as a stock or non-stock corporation. MIAA is not a stock corporation
because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares. x x x
Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x
x x." MIAA has capital but it is not divided into shares of stock. MIAA
has no stockholders or voting shares. Hence, MIAA is not a stock
corporation.
x x x
MIAA is also not a non-stock corporation because it
has no members. Section 87 of the Corporation Code defines a non-stock
corporation as "one where no part of its income is distributable as
dividends to its members, trustees or officers." A non-stock corporation
must have members. Even if we assume that the Government is considered
as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their
income to their members. Section 11 of the MIAA Charter mandates MIAA to
remit 20% of its annual gross operating income to the National
Treasury. This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that
non-stock corporations are "organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers." MIAA is not organized for any
of these purposes. MIAA, a public utility, is organized to operate an
international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock
corporation, MIAA does not qualify as a government-owned or controlled
corporation. What then is the legal status of MIAA within the National
Government?
MIAA is a government instrumentality vested with
corporate powers to perform efficiently its governmental functions. MIAA
is like any other government instrumentality, the only difference is
that MIAA is vested with corporate powers. x x x
When the law vests in a government instrumentality
corporate powers, the instrumentality does not become a corporation.
Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers. Thus, MIAA
exercises the governmental powers of eminent domain, police authority
and the levying of fees and charges. At the same time, MIAA exercises
"all the powers of a corporation under the Corporation Law, insofar as
these powers are not inconsistent with the provisions of this Executive
Order."9
Thus, MIAA is not a government-owned or controlled
corporation but a government instrumentality which is exempt from any
kind of tax from the local governments. Indeed, the exercise of the
taxing power of local government units is subject to the limitations
enumerated in Section 133 of the Local Government Code.10 Under Section 133(o)11
of the Local Government Code, local government units have no power to
tax instrumentalities of the national government like the MIAA. Hence,
MIAA is not liable to pay real property tax for the NAIA Pasay
properties.
Furthermore, the airport lands and buildings of MIAA
are properties of public dominion intended for public use, and as such
are exempt from real property tax under Section 234(a) of the Local
Government Code. However, under the same provision, if MIAA leases its
real property to a taxable person, the specific property leased becomes
subject to real property tax.12
In this case, only those portions of the NAIA Pasay properties which
are leased to taxable persons like private parties are subject to real
property tax by the City of Pasay.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the Manila International Airport Authority EXEMPT from real property tax imposed by the City of Pasay. We declare VOID
all the real property tax assessments, including the final notices of
real property tax delinquencies, issued by the City of Pasay on the NAIA
Pasay properties of the Manila International Airport Authority, except
for the portions that the Manila International Airport Authority has
leased to private parties.
No costs.SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chief Justice
| LEONARDO A. QUISUMBING Associate Justice |
CONSUELO YNARES-SANTIAGO Associate Justice |
| MA. ALICIA AUSTRIA-MARTINEZ Associate Justice |
RENATO C. CORONA Associate Justice |
| CONCHITA CARPIO MORALES Associate Justice |
DANTE O. TINGA Associate Justice |
| MINITA V. CHICO-NAZARIO Associate Justice |
PRESBITERO J. VELASCO, JR. Associate Justice |
| ANTONIO EDUARDO B. NACHURA Associate Justice |
TERESITA J. LEONARDO-DE CASTRO Associate Justice |
| ARTURO D. BRION Associate Justice |
DIOSDADO M. PERALTA Associate Justice |
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the
Constitution, I certify that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.
REYNATO S. PUNOChief Justice
Footnotes
1 Under Rule 45 of the 1997 Rules of Civil Procedure.
2
Penned by Associate Justice Ruben T. Reyes (now retired Supreme Court
Justice) with Associate Justices Remedios Salazar-Fernando and Edgardo
F. Sundiam, concurring.
3
Providing for a Revision of Executive Order No. 778 Creating the Manila
International Airport Authority, Transferring Existing Assets of the
Manila International Airport to the Authority, and Vesting the Authority
with Power to Administer and Operate the Manila International Airport.
4 Section 3 of EO 903 reads:
SEC. 3. Creation of the Manila International Airport Authority.
There is hereby established a body corporate to be known as the Manila
International Airport Authority which shall be attached to the Ministry
of Transportation and Communications. The principal office of the
Authority shall be located at the New Manila International Airport. The
Authority may establish such offices, branches, agencies or subsidiaries
as it may deem proper and necessary; Provided, that any subsidiary that
may be organized shall have the prior approval of the President.
The land where the Airport is presently located as
well as the surrounding land area of approximately six hundred hectares,
are hereby transferred, conveyed and assigned to the ownership and
administration of the Authority, subject to existing rights, if any. The
Bureau of Lands and other appropriate government agencies shall
undertake an actual survey of the area transferred within one year from
the promulgation of this Executive Order and the corresponding title to
be issued in the name of the Authority. Any portion thereof shall not be
disposed through the sale or through any other mode unless specifically
approved by the President of the Philippines.
5 Section 22 of EO 903 reads:
SEC. 22. Transfer of Existing Facilities and Intangible Assets.
All existing public airport facilities, runways, lands, buildings and
other property, movable and immovable, belonging to the Airport, and all
assets, powers, rights, interests and privileges belonging to the
Bureau of Air Transportation relating to airport works or air
operations, including all equipment which are necessary for the
operation of crash fire and rescue facilities, are hereby transferred to
the Authority.
6 G.R. No. 155650, 20 July 2006, 495 SCRA 591.
7 Id. at 644-645.
8 Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 reads:
SEC. 2. General Terms Defined.– x x x
(13) Government-owned or controlled corporation refers
to any agency organized as a stock or non-stock corporation, vested
with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through
its instrumentalities either wholly, or, where applicable as in the case
of stock corporations, to the extent of at least fifty-one (51) percent
of its capital stock: Provided, That government-owned or
controlled corporations may further be categorized by the department of
Budget, the Civil Service Commission, and the Commission on Audit for
the purpose of the exercise and discharge of their respective powers,
functions and responsibilities with respect to such corporations.
9 Supra note 6 at 615-618.
10 Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 150301, 2 October 2007, 534 SCRA 490.
11 Section 133(o) of the Local Government Code reads:
SECTION 133. Common Limitations on the Taxing Powers of the Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
x x x
(o) Taxes, fees or charges of any kind on the
National Government, its agencies and instrumentalities, and local
government units.
12 Manila International Airport Authority v. Court of Appeals, supra note 6.
The Lawphil Project - Arellano Law Foundation
DISSENTING OPINION
YNARES-SANTIAGO, J.:
Indeed, as pointed out by Justice Antonio T. Carpio,
the Court has twice reaffirmed the ruling in Manila International
Airport Authority v. Court of Appeals1 in the subsequent cases of Philippine Fisheries Development Authority v. Court of Appeals2 and Philippine Fisheries Development Authority v. Court of Appeals.3 However, upon further study of the issues presented in said cases, I agree with Justice Dante O. Tinga that the Manila International Airport Authority (MIAA)
ruling was incorrectly rationalized, particularly on the unwieldy
characterization of MIAA as a species of a government instrumentality. I
submit that the present ponencia of Justice Carpio perpetuates the
error which I find imperative for the Court to correct.
Nevertheless, unlike Justice Tinga’s rationalization,
I find that there is no more need to belabor the issue of whether the
MIAA is a government-owned or controlled corporation (GOCC) or a
government instrumentality in order to resolve the issue of whether the
airport properties are subject to real property tax.
Instead, I subscribe to the "simple, direct and
painless approach" proposed by Justice Antonio Eduardo B. Nachura that
it is imperative to "fine tune" the Court’s ruling in Mactan Cebu International Airport Authority v. Marcos4 vis-à-vis that in Manila International Airport Authority v. Court of Appeals;5 and that
what needs only to be ascertained is whether the airport properties are
owned by the Republic; and if such, then said properties are exempt
from real property tax, by applying Section 234 of Republic Act No. 7160
(R.A. No. 7160) or the Local Government Code (LGC).
Pursuant to Section 232 of the LGC, a province or
city or municipality within the Metropolitan Manila Area is vested with
the power to levy an annual ad valorem tax on real property such as
land, building, machinery, and other improvement not hereafter
specifically exempted. Corollarily, Section 234 thereof provides an
enumeration of certain properties which are exempt from payment of the
real property tax, among which is "real property owned by the Republic
of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise,
to a taxable person."
Article 420 of the Civil Code enumerates the properties of public dominion, to wit:
Art. 420: The following things are property of public dominion:
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being
for public use, and are intended for some public service or for the
development of the national wealth.
There is no question that the airport and all its
installations, facilities and equipment, are intended for public use and
are, thus, properties of public dominion.
Concededly, the Court ruled in Mactan Cebu International Airport Authority v. Marcos6 that:
The crucial issues then to be addressed are: (a)
whether the parcels of land in question belong to the Republic of the
Philippines whose beneficial use has been granted to the petitioner, and
(b) whether the petitioner is a "taxable persons."
Section 15 of [MCIAA’s] Charter provides:
Sec. 15. Transfer of Existing Facilities and Intangible Assets. – Al
existing public airport facilities, runways, lands, buildings and other
properties, movable or immovable, belonging to or presently
administered by the airports, and all assets, powers, rights, interests
and privileges relating on airport works or air operations, including
all equipment which are necessary for the operations of air navigation,
aerodome control towers, crash, fire, and rescue facilities are hereby
transferred to the Authority: Provided, however, that the operations
control of all equipment necessary for the operation of radio aids to
air navigation, airways communication, the approach control office, and
the area control center shall be retained by the Air Transportation
Office. No equipment, however, shall be removed by the Air
Transportation Office from Mactan without the concurrence of the
Authority. The Authority may assist in the maintenance of the Air
Transportation Office equipment.
The "airports" referred to are the "Lahug Air Port"
in Cebu City and the "Mactan International Airport in the Province of
Cebu," which belonged to the Republic of the Philippines, then under the
Air Transportation Office (ATO).
It may be reasonable to assume that the term "lands"
refer to "lands" in Cebu City then administered by the Lahug Air Port
and includes the parcels of land the respondent City of Cebu seeks to
levy on for real property taxes. This section involves a "transfer" of
the "lands" among other thins, to the petitioner and not just the
transfer of the beneficial use thereof, with the ownership being
retained by the Republic of the Philippines.
This "transfer" is actually an absolute conveyance of
the ownership thereof because the petitioner’s authorized capital stock
consists of, inter alia, "the value of such real estate owned
and/or administered by the airports." Hence, the petitioner is now the
owner of the land in question and the exception in Section 234© of the
LGC is inapplicable.
Meanwhile, Executive Order No. 9037 or the Revised Charter of the Manila International Airport Authority, provides in Section 3 thereof that –
x x x x
The land where the Airport is presently located as
well as the surrounding land area of approximately six hundred hectares,
are hereby transferred, conveyed and assigned to the ownership and
administration of the Authority, subject to existing rights, if any. The
Bureau of Lands and other appropriate government agencies shall
undertake an actual survey of the area transferred within one year from
the promulgation of this Executive Order and the corresponding title to
be issued in the name of the Authority. Any portion thereof shall not be
disposed through sale or through any other mode unless specifically
approved by the President of the Philippines.
Regardless of the apparent transfer of title of the
said properties to MIAA, I submit that the latter is only holding the
properties for the benefit of the Republic in its capacity as agent
thereof. It is to be noted that despite the conveyance of the title to
the said properties to the MIAA, however, the latter could not in any
way dispose of the same through sale or through any other mode unless
specifically approved by the President of the Republic.8
Even MIAA’s borrowing power is dictated upon by the President. Thus,
MIAA could raise funds, either from local or international sources, by
way of loans, credits or securities, and other borrowing instruments,
create pledges, mortgages and other voluntary lines or encumbrances on
any of its assets or properties, only after consultation with the
Secretary of Finance and with the approval of the President. In
addition, MIAA’s total outstanding indebtedness could exceed its net
worth only upon express authorization by the President. 9
I fully agree with Justice Nachura that "even if MIAA
holds the record title over the airport properties, such holding can
only be for the benefit of the Republic, that MIAA exercises an
essentially public function."
In sum, the airport and all its installations,
facilities and equipment of the MIAA, are properties of public dominion
and should thus be exempted from payment of real property tax, except
those properties where the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.
ACCORDINGLY, I vote to grant the petition.CONSUELO YNARES-SANTIAGO
Associate Justice
Footnotes
1 G.R. No. 155650, July 20, 2006, 495 SCRA 591.
2 G.R. No. 169836, July 31, 2007, 528 SCRA 707.
3 G.R. No. 151301, October 2, 2007, 534 SCRA 490.
4 330 Phil. 392 [1996].
5 Supra note 1.
6 Supra note 4.
7 July 21, 1983.
8 E.O. 903, Sec. 3.
9 E.O. 903, Sec. 16.
The Lawphil Project - Arellano Law Foundation
DISSENTING OPINION
TINGA, J.:
I maintain my dissent expressed in the 2006 ruling in MIAA v. City of Parañaque1 (the "Parañaque case.")
The majority relies on two main points drawn from the
2006 Parañaque case in this instance as it rules once again that the
MIAA is exempt from realty taxes assessed by the City of Pasay. First,
because MIAA is a government instrumentality, it somehow finds itself
exempt from the said taxes, supposedly by operation of the Local
Government Code. Second, the subject properties are allegedly owned by
the Republic of the Philippines, notwithstanding that legal title
thereto is in the name of the MIAA, which is a distinct and independent
juridical personality from the Republic.
I.
Once again, attempts are drawn to classify MIAA as a
government instrumentality, and not as a government owned or controlled
corporation. Such characterization was apparently insisted upon in order
to tailor-fit the MIAA to Section 133 of the Local Government Code,
which reads:
Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units.— Unless otherwise provided herein, the exercise
of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
x x x
15. Taxes, fees or charges of any kind on the
National Government, its agencies and instrumentalities and local
government units. (emphasis and underscoring supplied).
How was the Parañaque case able to define the MIAA as
a instrumentality of the National Government? The case propounded that
MIAA was not a GOCC:
There is no dispute that a government-owned or
controlled corporation is not exempt from real estate tax. However, MIAA
is not a government-owned or controlled corporation. Section 2(13) of
the Introductory Provisions of the Administrative Code of 1987 defines a
government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. — . . .
(13) Government-owned or controlled corporation
refers to any agency organized as a stock or non-stock corporation,
vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through
its instrumentalities either wholly, or, where applicable as in the case
of stock corporations, to the extent of at least fifty-one (51) percent
of its capital stock: . . . . (Emphasis supplied)
A government-owned or controlled corporation must be
"organized as a stock or non-stock corporation." MIAA is not organized
as a stock or non-stock corporation. MIAA is not a stock corporation
because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares.
x x x
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code 10 defines a stock
corporation as one whose "capital stock is divided into shares and . . .
authorized to distribute to the holders of such shares dividends . . .
." MIAA has capital but it is not divided into shares of stock. MIAA has
no stockholders or voting shares. Hence, MIAA is not a stock
corporation.
MIAA is also not a non-stock corporation because it
has no members. Section 87 of the Corporation Code defines a non-stock
corporation as "one where no part of its income is distributable as
dividends to its members, trustees or officers." A non-stock corporation
must have members. Even if we assume that the Government is considered
as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their
income to their members. Section 11 of the MIAA Charter mandates MIAA to
remit 20% of its annual gross operating income to the National
Treasury. 11 This prevents MIAA from qualifying as a non-stock
corporation.
Section 88 of the Corporation Code provides that
non-stock corporations are "organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers." MIAA is not organized for any
of these purposes. MIAA, a public utility, is organized to operate an
international and domestic airport for public use.2
This "black or white" categorization of "stock" and
"non-stock" corporations utterly disregards the fact that nothing in the
Constitution prevents Congress from creating government owned or
controlled corporations in whatever structure it deems necessary. Note
that this definitions of "stock" and "non-stock" corporations are taken
from the Administrative Code, and not the Constitution. The
Administrative Code is a statute, and is thus not superior in hierarchy
to any other subsequent statute created by Congress, including the
charters for GOCCs.
Since MIAA was presumed not to be a stock or
non-stock corporation, the majority in the Parañaque case then strived
to fit it into a category.
Since MIAA is neither a stock nor a non-stock
corporation, MIAA does not qualify as a government-owned or controlled
corporation. What then is the legal status of MIAA within the National
Government?
MIAA is a government instrumentality vested with
corporate powers to perform efficiently its governmental functions. MIAA
is like any other government instrumentality, the only difference is
that MIAA is vested with corporate powers. Section 2(10) of the
Introductory Provisions of the Administrative Code defines a government
"instrumentality" as follows:
SEC. 2. General Terms Defined. –– . . .
(10) Instrumentality refers to any agency of the
National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some
if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. . . . (Emphasis
supplied)
When the law vests in a government instrumentality
corporate powers, the instrumentality does not become a corporation.
Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers. Thus, MIAA
exercises the governmental powers of eminent domain, police authority
and the levying of fees and charges. At the same time, MIAA exercises
"all the powers of a corporation under the Corporation Law, insofar as
these powers are not inconsistent with the provisions of this Executive
Order."3
Unfortunately, this cited statutory definition of an
"instrumentality" is incomplete. Worse, the omitted portion from Section
2(10) completely contradicts the premise of the ponente that an
instrumentality is mutually exclusive from a GOCC. For the provision
reads in full, with the omitted portion highlighted, thus:
(10)Instrumentality refers to any agency of the
National Government not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some
if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government—owned or
controlled corporations.
This previous omission had not escaped the attention
of the outside world. For example, lawyer Gregorio Batiller, Jr., has
written a paper on the Parañaque case entitled "A Tale of Two Airports,"
which is published on the Internet.4 He notes therein:
Also of interest was the dissenting opinion of
Justice Dante Tinga to the effect that the majority opinion failed to
quote in full the definition of "government instrumentality:"
The Majority gives the impression that a government
instrumentality is a distinct concept from a government corporation.
Most tellingly, the majority selectively cites a portion of Section
2(10) of the Administrative Code of 1987, as follows:
Instrumentality refers to any agency of the National
Government not integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. xxx (emphasis omitted)"
However, Section 2(10) of the Administrative Code,
when read in full, makes an important clarification which the majority
does not show. The portions omitted by the majority are highlighted
below: xxx
"(10)Instrumentality refers to any agency of the
National Government not integrated within the department framework,
vested with special functions or jurisdiction by, law endowed with some
if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government – owned or
controlled corporations.
So the majority opinion effectively begged the
question in finding that the MIAA was not a GOCC but a mere government
instrumentality, which is other than a GOCC.5
The Office of the President itself was alarmed by the
redefinition made by the MIAA case of instrumentalities, causing it on
29 December 2006 to issue Executive Order No. 596 creating the unwieldy
category of "Government Instrumentality Vested with Corporate Powers or
Government Corporate Entities" just so that it was clear that these
newly defined "instrumentalities" or "government corporate entities"
still fell within the jurisdiction of the Office of the Government
Corporate Counsel. The E.O. reads in part:
EXECUTIVE ORDER NO. 596DEFINING AND INCLUDING "GOVERNMENT INSTRUMENTRALITY VESTED WITH CORPORATE POWERS" OR "GOVERNMENT CORPORATE ENTITIES" UNDER THE JURISDICTION OF THE OFFICE OF THE GOVERNMENT CORPORATE COUNSEL (OGCC) AS PRINCIPAL LAW OFFICE OF GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCs) AND FOR OTHER PURPOSES.WHEREAS, the Office of the Government Corporate Counsel (OGCC), as the principal law office of all Government-Owned or Controlled Corporations (GOCCs), including their subsidiaries, other corporate offsprings and government acquired assets corporations, plays a very significant role in safeguarding the legal interests and providing the legal requirements of all GOCCs;WHEREAS, there is an imperative need to integrate, strengthen and rationalize the powers and jurisdiction of the OGCC in the light of the Decision of the Supreme Court dated July 20, 2006, in the case of "Manila International Airport Authority vs. Court of Appeals, City of Parañaque, et al" (G.R. No. 155650), where the High Court differentiated "government corporate entities" and government instrumentalities with corporate powers" from GOCCs for purposes of the provisions of the Local Government Code on real estate taxes, and other fees and charges imposed by local government units;WHEREAS, in the interest of an effective administration of justice, the application and definition of the term "GOCCs" need to be further clarified and rationalized to have consistency in referring to the term and to avoid unintended conflicts and/or confusion’NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in my by law, do hereby order:SECTION 1. The Office of the Government Corporate Counsel (OGCC) shall be the principal law office of all GOCCs, except as may otherwise be provided by their respective charter or authorized by the President, their subsidiaries, corporate offsprings, and government acquired asset corporations. The OGCC shall likewise be the principal law of the "government instrumentality vested with corporate powers" or "government corporate entity," as defined by the Supreme Court in the case of "MIAA v. Court of Appeals, City of Parañaque, et al.," supra, notable examples of which are: Manila International Airport Authority (MIAA), Mactan International Airport Authority, the Philippine Ports Authority (PPA), Philippine Deposit Insurance Corporation (PDIC), Metropolitan Water and Sewerage Services (MWSS), Philippine Rice Research Institute (PRRI), Laguna Lake Development Authority (LLDA), Fisheries Development Authority (FDA), Bases Conversion Development Authority (BCDA), Cebu Port Authority (CPA), Cagayan de Oro Port Authority, and San Fernando Port Authority.SECTION 2. As provided under PD 2029, series of 1986, the term GOCCs is defined as a stock or non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law, is owned or controlled by the government directly, or indirectly, through a parent corporation or subsidiary corporation, to the extent of at least majority of its outstanding capital stock or of its outstanding voting capital stock.Under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987, a government "instrumentality" refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some, if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter.SECTION 3. The following corporations are considered GOCCs under the conditions and/or circumstances indicated:
Reading this Executive Order, one cannot help but get
the impression that the Republic of the Philippines, ostensibly the
victorious party in the Parañaque case, felt that the 2006 ponencia
redefining "instrumentalities" was wrong. Ostensibly, the Office of the
Government Corporate Counsel, the winning counsel in the MIAA case,
cooperated in the drafting of this E.O. and probably also felt that the
redefinition of "instrumentalities" was wrong. I had pointed out in my
Dissent to the MIAA case that under the framework propounded in that
case, GOCCs such as the Philippine Ports Authority, the Bases Conversion
Development Authority, the Philippine Economic Zone Authority, the
Light Rail Transit Authority, the Bangko Sentral ng Pilipinas, the
National Power Corporation, the Lung Center of the Philippines, and even
the Philippine Institute of Traditional and Alternative Health Care
have been reclassified as instrumentalities instead of GOCCs.
Notably, GOCCs are mandated by Republic Act No. 7656
to remit 50% of their annual net earnings as cash, stock or property
dividends to the National Government. By denying categorization of those
above-mentioned corporations as GOCCs, the Court in MIAA effectively
gave its imprimatur to those entities to withhold remitting
50% of their annual net earnings to the National
Government. Hence, the necessity of E.O. No. 596 to undo the destructive
effects of the Parañaque case on the national coffers.
In a welcome development, the majority now
acknowledges the existence of that second clause in Section 2(10) of the
Introductory Provisions of the Administrative Code, the clause which
made explicit that government instrumentalities include GOCCs. In truth,
I had never quite understood this hesitation in plainly saying that
GOCCs are instrumentalities. That fact is really of little consequence
in determining whether or not the MIAA or other government
instrumentalities or GOCCs are exempt from real property taxes.
As I had consistently explained, the liability of
such entities is mandated by Section 232, in relation with Section 234
of the Local Government Code. Section 232 lays down the general rule
that provinces, cities or municipalities within Metro Manila may levy an
ad valorem tax on real property "not hereinafter specifically
exempted." Such specific exemptions are enumerated in Section 234, and
the only exemption tied to government properties extends to "real
property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted…to a taxable person."6
Moreover, the final paragraph of Section 234 explains
that "[e]xcept as provided herein [in Section 234], any exemption from
payment of real property tax previously granted to, or presently enjoyed
by all persons, whether natural or juridical, including all
government-owned or –controlled corporations are hereby withdrawn upon
the effectivity of this Code."
What are the implications of Section 232 in relation
to Section 234 as to the liability for real property taxes of government
instrumentalities such as MIAA?
1) All persons, whether natural or juridical, including GOCCs are liable for real property taxes.
2) The only exempt properties are those owned by the Republic or any of its political subdivisions.
3) So-called "government corporate entities," so long
as they have juridical personality distinct from the Republic of the
Philippines or any of its political subdivisions, are liable for real
property taxes.
4) After the enactment of the Local Government Code
in 1991, Congress remained free to reenact tax exemptions from real
property taxes to government instrumentalities, as it did with the
Government Service Insurance System in 1997.
It is that simple. The most honest intellectual
argument favoring the exemption of the MIAA from real property taxes
corresponds with the issue of whether its properties may be deemed as
"owned by the Republic or any of its political subdivisions". The matter
of whether MIAA is a GOCC or an instrumentality or a "government
corporate entity" should in fact be irrelevant. However, the framework
established by the ponente beginning with the Parañaque case has
inexplicably and unnecessarily included the question of what is a GOCC?
That issue, utterly irrelevant to settling the question of MIAA’s tax
liability, has caused nothing but distraction and confusion.
It should be remembered that prior to the Parañaque
case, the prevailing rule on taxation of GOCCs was as enunciated in
Mactan Cebu International Airport v. Hon. Marcos.7
That rule was a highly sensible rule that gave due respect to national
government prerogatives and the devolution of taxing powers to local
governments. Neither did Mactan Cebu prevent Congress from enacting
legislation exempting selected GOCCs to be exempt from real property
taxes.
A significant portion of my Dissenting Opinion in the
Parañaque case was devoted to explaining Mactan Cebu, and criticizing
the ponencia for implicitly rejecting that doctrine without
categorically saying so. In the years since, significant confusion has
arisen on whether Mactan Cebu and the framework it established in real
property taxation of GOCCs and instrumentalities, remains extant.
Batiller makes the same point in his paper, expressly asking why "the
Supreme Court did not explicitly declare that the Mactan Cebu
International Airport case was deemed repealed." He added:
Inevitably, the refusal of the Supreme Court to
clarify whether its Decision in the Mactan Cebu International Airport
case is deemed repealed would leave us with an ambiguous situation where
two (2) of our major international airports are treated differently tax
wise: one in Cebu which is deemed to be a GOCC subject to real estate
taxes and the other in Manila which is not a GOCC and exempt from real
estate taxes.
Where lies the substantial difference between the two (2) airports? Your guess is as good as mine.8
There are no good reasons why the Court should not
reassert the Mactan Cebu doctrine. Under that ruling, real properties
owned by the Republic of the Philippines or any of its political
subdivisions are exempted from the payment of real property taxes, while
instrumentalities or GOCCs are generally exempted from local government
taxes, save for real property taxes. At the same time, Congress is free
should it so desire to exempt particular GOCCs or instrumentalities
from real property taxes by enacting legislation for that purpose. This
paradigm is eminently more sober than that created by the Parañaque
case, which attempted to amend the Constitution by elevating as a
constitutional principle, the real property tax exemption of all
government instrumentalities, most of which also happen to be GOCCs.
Considering that the Constitution itself is supremely deferential to the
notion of local government rule and the power of local governments to
generate revenue through local taxes, the idea that not even the local
government code could subject such "instrumentalities" to local taxes is
plainly absurd.
II.
I do recognize that the present majority opinion has
chosen to lay equal, if not greater emphasis on the premise that the
MIAA properties are supposedly of public dominion, and as such are
exempt from realty taxes under Section 234(a) of the Local Government
Code. Again, I respectfully disagree.
It is Article 420 of the Civil Code which defines
what are properties of public dominion. I do not doubt that Article 420
can be interpreted in such a way that airport properties, such as its
runways, hangars and the like, can be considered akin to ports or roads,
both of
which are among those properties considered as part
of the public dominion under Article 420(1). It may likewise be possible
that those properties considered as "property of public dominion" under
Article 420 of the Civil Code are also "property owned by the
Republic," which under Section 234 of the Local Government Code, are
exempt from real property taxes.
The necessary question to ask is whether properties
which are similar in character to those enumerated under Article 420(1)
may be considered still part of the public dominion if, by virtue of
statute, ownership thereof is vested in a GOCC which has independent
juridical personality from the Republic of the Philippines. The question
becomes even more complex if, as in the case of MIAA, the law itself
authorizes such GOCC to sell the properties in question.
One of the most recognizable characteristics of
public dominion properties is that they are placed outside the commerce
of man and cannot be alienated or leased or otherwise be the subject
matter of contracts.9
The fact is that the MIAA may, by law, alienate, lease or place the
airport properties as the subject matter of contracts. The following
provisions of the MIAA charter make that clear:
SECTION 5. Functions, Powers, and Duties. — The Authority shall have the following functions, powers and duties:
xxx xxx xxx
(i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose
of any land, building, airport facility, or property of whatever kind
and nature, whether movable or immovable, or any interest therein;
xxx
SECTION 16. Borrowing Power. — The Authority may,
after consultation with the Minister of Finance and with the approval of
the President of the Philippines, as recommended by the Minister of
Transportation and Communications, raise funds, either from local or
international sources, by way of loans, credits or securities, and other
borrowing instruments, with the power to create pledges, mortgages and other voluntary liens or encumbrances on any of its assets or properties.
There is thus that contradiction where property which
ostensibly is classified as part of the public dominion under Article
420 of the Civil Code is nonetheless classified to lie within the
commerce of man by virtue of a subsequent law such as the MIAA charter.
In order for the Court to classify the MIAA properties as part of public
dominion, it will be necessary to invalidate the provisions of the MIAA
charter allowing the Authority to lease, sell, create pledges,
mortgages and other voluntary liens or encumbrances on any of the
airport properties. The provisions of the MIAA charter could not very
well be invalidated with the Civil Code as basis, since the MIAA charter
and the Civil Code are both statutes, and thus of equal rank in the
hierarchy of laws, and more significantly the Civil Code was enacted
earlier and therefore could not be the repealing law.
If there is a provision in the Constitution that
adopted the definition of and limitations on public dominion properties
as found in the Civil Code, then the aforequoted provisions from the
MIAA charter allowing the Authority to place its properties within the
commerce of man may be invalidated. The Constitution however does not do
so, confining itself instead to a general statement that "all lands of
the public domain, waters, minerals, coal, petroleum, and other mineral
oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the
State." Note though that under Article 420, public dominion properties
are not necessarily owned by the State, the two subsections thereto
referring to (a) properties intended for public use; and (b) those which
belong to the State and are intended for some public service or for the
development of the national wealth.10 In Laurel v.
Garcia,11
the Court notably acknowledged that "property of public dominion is not
owned by the State but pertains to the State." Thus, there is no
equivalence between the concept of public dominion under the Civil Code,
and of public domain under the Constitution.
Accordingly, the framework of public dominion
properties is one that is statutory, rather than constitutional in
design. That being the case, Congress is able by law to segregate
properties which ostensibly are, by their nature, part of the public
dominion under Article 420(1) of the Civil Code, and place them within
the commerce of man by vesting title thereto in an independent juridical
personality such as the MIAA, and authorizing their sale, lease,
mortgage and other similar encumbrances. When Congress accomplishes that
by law, the properties could no longer be considered as part of the
public dominion.
This point has been recognized by previous
jurisprudence which I had cited in my dissent in the Parañaque case. For
example, in Philippine Ports Authority v. City of Iloilo, the Court
stated that "properties of public dominion are owned by the general
public and cannot be declared to be owned by a public corporation, such
as [the Philippine Ports Authority]."12 I had likewise previously explained:
The second Public Ports Authority case, penned by
Justice Callejo, likewise lays down useful doctrines in this regard. The
Court refuted the claim that the properties of the PPA were owned by
the Republic of the Philippines, noting that PPA's charter expressly
transferred ownership over these properties to the PPA, a situation
which similarly obtains with MIAA. The Court even went as far as saying
that the fact that the PPA "had not been issued any torrens title over
the port and port facilities and appurtenances is of no legal
consequence. A torrens title does not, by itself, vest ownership; it is
merely an evidence of title over properties. . . . It has never been
recognized as a mode of acquiring ownership over real properties."
The Court further added:
. . . The bare fact that the port and its facilities
and appurtenances are accessible to the general public does not exempt
it from the payment of real property taxes. It must be stressed that the
said port facilities and appurtenances are the petitioner's corporate
patrimonial properties, not for public use, and that the operation of
the port and its facilities and the administration of its buildings are
in the nature of ordinary business. The petitioner is clothed, under
P.D. No. 857, with corporate status and corporate powers in the
furtherance of its proprietary interests . . . The petitioner is even
empowered to invest its funds in such government securities approved by
the Board of Directors, and derives its income from rates, charges or
fees for the use by vessels of the port premises, appliances or
equipment. . . . Clearly then, the petitioner is a profit-earning
corporation; hence, its patrimonial properties are subject to tax.
There is no doubt that the properties of the MIAA, as
with the PPA, are in a sense, for public use. A similar argument was
propounded by the Light Rail Transit Authority in Light Rail Transit
Authority v. Central Board of Assessment, 118 which was cited in
Philippine Ports Authority and deserves renewed emphasis. The Light Rail
Transit Authority (LRTA), a body corporate, "provides valuable
transportation facilities to the paying public." 119 It claimed that its
carriage-ways and terminal stations are immovably attached to
government-owned
national roads, and to impose real property taxes
thereupon would be to impose taxes on public roads. This view did not
persuade the Court, whose decision was penned by Justice (now Chief
Justice) Panganiban. It was noted:
Though the creation of the LRTA was impelled by
public service — to provide mass transportation to alleviate the traffic
and transportation situation in Metro Manila — its operation undeniably
partakes of ordinary business. Petitioner is clothed with corporate
status and corporate powers in the furtherance of its proprietary
objectives. Indeed, it operates much like any private corporation
engaged in the mass transport industry. Given that it is engaged in a
service-oriented commercial endeavor, its carriageways and terminal
stations are patrimonial property subject to tax, notwithstanding its
claim of being a government-owned or controlled corporation.
xxx xxx xxx
Petitioner argues that it merely operates and
maintains the LRT system, and that the actual users of the carriageways
and terminal stations are the commuting public. It adds that the public
use character of the LRT is not negated by the fact that revenue is
obtained from the latter's operations.
We do not agree. Unlike public roads which are open
for use by everyone, the LRT is accessible only to those who pay the
required fare. It is thus apparent that petitioner does not exist solely
for public service, and that the LRT carriageways and terminal stations
are not exclusively for public use. Although petitioner is a public
utility, it is nonetheless profit-earning. It actually uses those
carriageways and terminal stations in its public utility business and
earns money therefrom.
xxx xxx xxx
Even granting that the national government indeed
owns the carriageways and terminal stations, the exemption would not
apply because their beneficial use has been granted to petitioner, a
taxable entity.
There is no substantial distinction between the
properties held by the PPA, the LRTA, and the MIAA. These three entities
are in the business of operating facilities that promote public
transportation.
The majority further asserts that MIAA's properties,
being part of the public dominion, are outside the commerce of man. But
if this is so, then why does Section 3 of MIAA's charter authorize the
President of the Philippines to approve the sale of any of these
properties? In fact, why does MIAA's charter in the first place
authorize the transfer of these airport properties, assuming that indeed
these are beyond the commerce of man?13
III.
In the present case, the City of Pasay had issued
notices of levy and warrants of levy for the NAIA Pasay properties,
leading MIAA to file with the Court of Appeals a petition for
prohibition and injunction, seeking to enjoin the City of Pasay from
imposing real property taxes, levying against and auctioning for public
sale the NAIA Pasay properties.
In the Parañaque case, I had expressed that while
MIAA was liable for the realty taxes, its properties could not be
foreclosed upon by the local government unit seeking the taxes. I
explained then:
Despite the fact that the City of Parañaque
ineluctably has the power to impose real property taxes over the MIAA,
there is an equally relevant statutory limitation on this power that
must be fully upheld. Section 3 of the MIAA charter states that "[a]ny
portion [of the [lands transferred, conveyed and assigned to the
ownership and administration of the MIAA] shall not be disposed through
sale or through any other mode unless specifically approved by the
President of the Philippines."
Nothing in the Local Government Code, even with its
wide grant of powers to LGUs, can be deemed as repealing this
prohibition under Section 3, even if it effectively forecloses one
possible remedy of the LGU in the collection of delinquent real property
taxes. While the Local Government Code withdrew all previous local tax
exemptions of the MIAA and other natural and juridical persons, it did
not similarly withdraw any previously enacted prohibitions on properties
owned by GOCCs, agencies or instrumentalities. Moreover, the resulting
legal effect, subjecting on one hand the MIAA to local taxes but on the
other hand shielding its properties from any form of sale or
disposition, is not contradictory or paradoxical, onerous as its effect
may be on the LGU. It simply means that the LGU has to find another way
to collect the taxes due from MIAA, thus paving the way for a mutually
acceptable negotiated solution.
Accordingly, I believe that MIAA is entitled to a
writ of prohibition and injunctive relief enjoining the City of Pasay
from auctioning for public sale the NAIA Pasay properties. Thus, the
Court of Appeals erred when it denied those reliefs to the MIAA.
I VOTE to PARTIALLY GRANT the petition and to issue
the Writ of Prohibition insofar as it would enjoin the City of Pasay
from auctioning for public sale the NAIA Pasay properties. In all other
respects, I respectfully dissent.
DANTE O. TINGAAssociate Justice
Footnotes
1 G.R. No. 155630, 20 July 2006, 495 SCRA 591.
2 Supra note 1 at 615-616.
3 Supra note 1 at 617-618.
5 Supra note 4.
6 Local Government Code, Sec. 234(a).
7 330 Phil. 392 (1996).
8 Supra note 4.
9 Villarico v. Sarmiento, G.R. No. 136438, 11 November 2004, 442 SCRA 110.
10 See Civil Code, Art. 420.
11 G.R. No. 92013, 25 July 1990, 187 SCRA 797.
12 G.R. No. 109791, 14 July 2003, 406 SCRA 88.
13 Supra note 1 at 694-696, J. Tinga, dissenting.
The Lawphil Project - Arellano Law Foundation
SEPARATE OPINION
NACHURA, J.:
Are airport properties subject to real property tax?
The question seriously begs for a definitive resolution, in light of our
ostensibly contradictory decisions1 that may have generated no small measure of confusion even among lawyers and magistrates.
Hereunder, I propose a simple, direct and painless approach to arrive at an acceptable answer to the question.
I.
Real property tax is a direct tax on the ownership of
lands and buildings or other improvements thereon, not specially
exempted, and is payable regardless of whether the property is used or
not, although the value may vary in accordance with such factor. The tax
is usually single or indivisible, although the land and building or
improvements erected thereon are assessed separately, except when the
land and building or improvements belong to separate owners.2
The power to levy this tax is vested in local
government units (LGUs). Thus, Republic Act (R.A.) No. 7160, or the
Local Government Code (LGC) of 1991,3 provides:
Under Book II, Title II, Chapter IV-Imposition of Real Property Tax
Section 232. Power to Levy Real Property Tax.—A
province or city or a municipality within the Metropolitan Manila Area
may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter specifically
exempted.4
A significant innovation in the LGC is the
withdrawal, subject to some exceptions, of all tax exemption privileges
of all natural or juridical persons, including government-owned and
controlled corporations (GOCCs), thus:
Under Book II, Title I, Chapter V-Miscellaneous Provisions
Section 193. Withdrawal of Tax Exemption
Privileges.—Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons, whether
natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered
under R.A. No. 6938, non-stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the effectivity of this Code.5
This is where the controversy started. The airport
authorities, formerly exempt from paying taxes, are now being obliged to
pay real property tax on airport properties.
To challenge the real property tax assessments, the
airport authorities invoke two provisions of the LGC—one is stated in
Book II, Title I, Chapter I on General Provisions, which reads:
Section 133. Common Limitations on the Taxing Powers
of Local Government Units.—Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein;
(d) Customs duties, registration fees of vessel and
wharfage on wharves, tonnage dues, and all other kinds of customs fees,
charges and dues except wharfage on wharves constructed and maintained
by the local government unit concerned;
(e) Taxes, fees, and charges and other impositions
upon goods carried into or out of, or passing through, the territorial
jurisdictions of local government units in the guise of charges for
wharfage, tolls for bridges or otherwise, or other taxes, fees, or
charges in any form whatsoever upon such goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the
Board of Investments as pioneer or non-pioneer for a period of six (6)
and four (4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the
National Internal Revenue Code, as amended, and taxes, fees or charges
on petroleum products;
(i) Percentage or value-added tax (VAT) on sales,
barters or exchanges or similar transactions on goods or services except
as otherwise provided herein;
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of passengers or
freight by hire and common carriers by air, land or water, except as
provided in this Code;
(k) Taxes on premiums paid by way of reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of
motor vehicles and for the issuance of all kinds of licenses or permits
for the driving thereof, except tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and
Barangay Business Enterprises and cooperatives duly registered under
R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight
(R.A. No. 6938) otherwise known as the "Cooperative Code of the
Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the
National Government, its agencies and instrumentalities, and local
government units.6
and the other in Book II, Title I, Chapter IV on Imposition of Real Property Tax:
Section 234. Exemptions from Real Property Tax.—The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise,
to a taxable person;
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, nonprofit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts and
government-owned or controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric
power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment
of real property tax previously granted to, or presently enjoyed by,
all persons, whether natural or juridical, including all
government-owned or controlled corporations are hereby withdrawn upon
the effectivity of this Code.7
In Mactan Cebu International Airport Authority (MCIAA) v. Marcos,8
the Court ruled that Section 133(o) is qualified by Sections 232 and
234. Thus, MCIAA could not seek refuge in Section 133(o), but only in
Section 234(a) provided it could establish that the properties were
owned by the Republic of the Philippines. The Court ratiocinated, thus:
[R]eading together Sections 133, 232, and 234 of the
LGC, we conclude that as a general rule, as laid down in Section 133,
the taxing powers of local government units cannot extend to the levy
of, inter alia, "taxes, fees and charges of any kind on the
National Government, its agencies and instrumentalities, and local
government units"; however, pursuant to Section 232, provinces, cities,
and municipalities in the Metropolitan Manila Area may impose the real
property tax except on, inter alia, "real property owned by the
Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person," as provided in item (a) of the first
paragraph of Section 234.
As to tax exemptions or incentives granted to or
presently enjoyed by natural or juridical persons, including
government-owned and controlled corporations, Section 193 of the LGC
prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except
those granted to local water districts, cooperatives duly registered
under R.A. No. 6938, non-stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the LGC. The latter
proviso could refer to Section 234 which enumerates the properties
exempt from real property tax. But the last paragraph of Section 234
further qualifies the retention of the exemption insofar as real
property taxes are concerned by limiting the retention only to those
enumerated therein; all others not included in the enumeration lost the
privilege upon the effectivity of the LGC. Moreover, even as to real
property owned by the Republic of the Philippines or any of its
political subdivisions covered by item (a) of the first paragraph of
Section 234, the exemption is withdrawn if the beneficial use of such
property has been granted to a taxable person for consideration or
otherwise.
Since the last paragraph of Section 234 unequivocally
withdrew, upon the effectivity of the LGC, exemptions from payment of
real property taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except as provided in the
said section, and the petitioner is, undoubtedly, a government-owned
corporation, it necessarily follows that its exemption from such tax
granted it in Section 14 of its Charter, R.A. No. 6958, has been
withdrawn. Any claim to the contrary can only be justified if the
petitioner can seek refuge under any of the exceptions provided in
Section 234, but not under Section 133, as it now asserts, since, as
shown above, the said section is qualified by Sections 232 and 234.
In short, the petitioner can no longer invoke the
general rule in Section 133 that the taxing powers of the local
government units cannot extend to the levy of:
(o) taxes, fees or charges of any kind on the
National Government, its agencies or instrumentalities, and local
government units.9
In addition, the Court went on to hold that the
properties comprising the Lahug International Airport and the Mactan
International Airport are no longer owned by the Republic, the latter
having conveyed the same absolutely to MCIAA.
About a decade later, however, the Court ruled in Manila International Airport Authority (MIAA) v. Court of Appeals,10
that the airport properties, this time comprising the Ninoy Aquino
International Airport (NAIA), are exempt from real property tax. It
justified its ruling by categorizing MIAA as a government
instrumentality specifically exempted from paying tax by Section 133(o)
of R.A. No. 7160. It further reasoned that the subject properties are
properties of public dominion, owned by the Republic, and are only held
in trust by MIAA, thus:
Under Section 2(10) and (13) of the Introductory
Provisions of the Administrative Code, which governs the legal relation
and status of government units, agencies and offices within the entire
government machinery, MIAA is a government instrumentality and not a
government-owned or controlled corporation. Under Section 133(o) of the
Local Government Code, MIAA as a government instrumentality is not a
taxable person because it is not subject to "[t]axes, fees or charges of
any kind" by local governments. The only exception is when MIAA leases
its real property to a "taxable person" as provided in Section 234(a) of
the Local Government Code, in which case the specific real property
leased becomes subject to real estate tax. Thus, only portions of the
Airport Lands and Buildings leased to taxable persons like private
parties are subject to real estate tax by the City of Parañaque.
Under Article 420 of the Civil Code, the Airport
Lands and Buildings of MIAA, being devoted to public use, are properties
of public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions "ports x x x constructed
by the State," which includes public airports and seaports, as
properties of public dominion and owned by the Republic. As properties
of public dominion owned by the Republic, there is no doubt whatsoever
that the Airport Lands and Buildings are expressly exempt from real
estate tax under Section 234(a) of the Local Government Code. This Court
has also repeatedly ruled that properties of public dominion are not
subject to execution or foreclosure sale.11
II.
In this case, we are confronted by the very same issue.
A basic principle in statutory construction decrees
that, to discover the general legislative intent, the whole statute, and
not only a particular provision thereof, should be considered. Every
section, provision or clause in the law must be read and construed in
reference to each other in order to arrive at the true intention of the
legislature.12
Notably, Section 133 of the LGC speaks of the general
limitations on the taxing power of LGUs. This is reinforced by its
inclusion in Title I, Chapter I entitled "General Provisions" on "Local
Government Taxation." On the other hand, Section 234, containing the
enumeration of the specific exemptions from real property tax, is in
Chapter IV entitled "Imposition of Real Property Tax" under Title II on
"Real Property Taxation." When read together, Section 234, a specific
provision, qualifies Section 133, a general provision.
Indeed, whenever there is a particular enactment and a
general enactment in the same statute, and the latter, taken in its
most comprehensive sense, will overrule the former, the particular
enactment must be operative, and the general enactment must be taken to
affect only the other parts of the statute to which it may properly
apply.13
Otherwise stated, where there are two acts or provisions, one of which
is special and particular, and certainly includes the matter in
question, and the other general, which, if standing alone, will include
the same matter and thus conflict with the special act or provision, the
special must be taken as intended to constitute an exception to the
general act or provision, especially when such general and special acts
or provisions are contemporaneous, as the legislature is not to be
presumed to have intended a conflict.14
Mactan Cebu therefore adheres to the intendment of
the law insofar as it holds that MCIAA cannot seek refuge in Section
133(o); that it can only invoke Section 234(a) so long as it can
establish that the properties were owned by the Republic of the
Philippines. To repeat, Section 234, which specifies the properties
exempted from real property tax, prevails over the general limitations
on the taxing power of LGUs stated in Section 133.
Thus, if Section 133(o) is not to be a haven, then, I
respectfully submit that it is no longer necessary to dichotomize
between a government instrumentality and a GOCC. As stressed by the
Court in Mactan Cebu, what need only be ascertained is whether the
airport properties are owned by the Republic if the airport Authority is
to be freed from the burden of paying the real property tax. Similarly,
in MIAA, with the Court’s finding that the NAIA lands and buildings are
owned by the Republic, the airport Authority does not have to pay real
property tax to the City of Parañaque.
III.
As pointed out earlier, Mactan Cebu and MIAA
ostensibly contradict each other. While the first considers airport
properties as subject to real property tax, the second exempts the same
from this imposition. The conflict, however, is more apparent than real.
The divergent conclusions in the two cases proceed from different
premises; hence, the resulting contradiction.
To elucidate, in Mactan Cebu, the Court focused on
the proper interpretation of Sections 133, 232 and 234 of the LGC, and
emphasized the nature of the tax exemptions granted by law. Mactan Cebu
categorized the exemptions as based on the ownership, character and use
of the property, thus:
(a) Ownership Exemptions. Exemptions from real
property taxes on the basis of ownership are real properties owned by:
(i) the Republic, (ii) a province, (iii) a city, (iv) a municipality,
(v) a barangay, and (vi) registered cooperatives.
(b) Character Exemptions. Exempted from real
property taxes on the basis of their character are: (i) charitable
institutions, (ii) houses and temples of prayer like churches,
parsonages or convents appurtenant thereto, mosques, and (iii)
non-profit or religious cemeteries.
(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use
to which they are devoted are: (i) all lands, buildings and
improvements which are actually directly and exclusively used for
religious, charitable or educational purposes; (ii) all machineries and
equipment actually, directly and exclusively used by local water
districts or by government-owned or controlled corporations engaged in
the supply and distribution of water and/or generation and transmission
of electric power; and (iii) all machinery and equipment used for
pollution control and environmental protection.
To help provide a healthy environment in the midst of
the modernization of the country, all machinery and equipment for
pollution control and environmental protection may not be taxed by local
governments.15
For the airport properties to be exempt from real
property tax, they must fall within the mentioned categories. Logically,
the airport properties can only qualify under the first exemption–by
virtue of ownership. But, as already mentioned, the Court, nevertheless,
ruled in Mactan Cebu that the said properties are no longer owned by
the Republic having been conveyed absolutely to the airport Authority,
thus:
Section 15 of the petitioner’s Charter provides:
Sec. 15. Transfer of Existing Facilities and Intangible Assets.
— All existing public airport facilities, runways, lands, buildings and
other properties, movable or immovable, belonging to or presently
administered by the airports, and all assets, powers, rights, interests
and privileges relating on airport works or air operations, including
all equipment which are necessary for the operations of air navigation,
aerodrome control towers, crash, fire, and rescue facilities are hereby
transferred to the Authority: Provided, however, that the operations
control of all equipment necessary for the operation of radio aids to
air navigation, airways communication, the approach control office, and
the area control center shall be retained by the Air Transportation
Office. No equipment, however, shall be removed by the Air
Transportation Office from Mactan without the concurrence of the
Authority. The Authority may assist in the maintenance of the Air
Transportation Office equipment.
The "airports" referred to are the "Lahug Air Port"
in Cebu City and the "Mactan International Airport in the Province of
Cebu," which belonged to the Republic of the Philippines, then under the
Air Transportation Office (ATO).
It may be reasonable to assume that the term "lands"
refer to "lands" in Cebu City then administered by the Lahug Air Port
and includes the parcels of land the respondent City of Cebu seeks to
levy on for real property taxes. This section involves a "transfer" of
the "lands," among other things, to the petitioner and not just the
transfer of the beneficial use thereof, with the ownership being
retained by the Republic of the Philippines.
This "transfer" is actually an absolute conveyance of
the ownership thereof because the petitioner’s authorized capital stock
consists of, inter alia, "the value of such real estate owned and/or administered by the airports." Hence, the petitioner is now the owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable.16
In MIAA, a different conclusion was reached by the
Court on two grounds. It first banked on the general provision limiting
the taxing power of LGUs as stated in Section 133(o) of the LGC that,
unless otherwise provided in the Code, the exercise of the taxing powers
of LGUs shall not extend to the levy of taxes, fees or charges of any
kind on the National Government, its agencies and instrumentalities, and
LGUs. The Court took pains in characterizing airport authorities as
government instrumentalities, quite obviously, in order to apply the
said provision.
After doing so, the Court then shifted its attention
and proceeded to focus on the issue of who owns the property to
determine whether the case falls within the purview of Section 234(a).
Ratiocinating that airport properties are of public dominion which
pertain to the state and that the airport Authority is a mere trustee of
the Republic, the Court ruled that the said properties are exempt from
real property tax, thus:
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property
of public dominion and therefore owned by the State or the Republic of
the Philippines. The Civil Code provides:
x x x x
No one can dispute that properties of public dominion
mentioned in Article 420 of the Civil Code, like "roads, canals,
rivers, torrents, ports and bridges constructed by the State,"
are owned by the State. The term "ports" includes seaports and airports.
The MIAA Airport Lands and Buildings constitute a "port" constructed by
the State. Under Article 420 of the Civil Code, the MIAA Airport Lands
and Buildings are properties of public dominion and thus owned by the
State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public
use because they are used by the public for international and domestic
travel and transportation. The fact that the MIAA collects terminal fees
and other charges from the public does not remove the character of the
Airport Lands and Buildings as properties for public use. The operation
by the government of a tollway does not change the character of the road
as one for public use. Someone must pay for the maintenance of the
road, either the public indirectly through the taxes they pay the
government, or only those among the public who actually use the road
through the toll fees they pay upon using the road. The tollway system
is even a more efficient and equitable manner of taxing the public for
the maintenance of public roads.
The charging of fees to the public does not determine
the character of the property whether it is of public dominion or not.
Article 420 of the Civil Code defines property of public dominion as one
"intended for public use." Even if the government collects toll fees,
the road is still "intended for public use" if anyone can use the road
under the same terms and conditions as the rest of the public. The
charging of fees, the limitation on the kind of vehicles that can use
the road, the speed restrictions and other conditions for the use of the
road do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well
as the landing fees MIAA charges to airlines, constitute the bulk of
the income that maintains the operations of MIAA. The collection of such
fees does not change the character of MIAA as an airport for public
use. Such fees are often termed user’s tax. This means taxing those
among the public who actually use a public facility instead of taxing
all the public including those who never use the particular public
facility. A user’s tax is more equitable — a principle of taxation
mandated in the 1987 Constitution.
The Airport Lands and Buildings of MIAA, which its
Charter calls the "principal airport of the Philippines for both
international and domestic air traffic," are properties of public
dominion because they are intended for public use. As properties of
public dominion, they indisputably belong to the State or the Republic
of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted
to public use and thus are properties of public dominion. As properties
of public dominion, the Airport Lands and Buildings are outside the
commerce of man. The Court has ruled repeatedly that properties of
public dominion are outside the commerce of man. As early as 1915, this
Court already ruled in Municipality of Cavite v. Rojas that properties
devoted to public use are outside the commerce of man, thus:
x x x x
Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man:
x x x x
The Court has also ruled that property of public
dominion, being outside the commerce of man, cannot be the subject of an
auction sale.
Properties of public dominion, being for public use,
are not subject to levy, encumbrance or disposition through public or
private sale. Any encumbrance, levy on execution or auction sale of any
property of public dominion is void for being contrary to public policy.
Essential public services will stop if properties of public dominion
are subject to encumbrances, foreclosures and auction sale. This will
happen if the City of Parañaque can foreclose and compel the auction
sale of the 600-hectare runway of the MIAA for non-payment of real
estate tax.
Before MIAA can encumber the Airport Lands and
Buildings, the President must first withdraw from public use the Airport
Lands and Buildings. Sections 83 and 88 of the Public Land Law or
Commonwealth Act No. 141, which "remains to this day the existing
general law governing the classification and disposition of lands of the
public domain other than timber and mineral lands," provide:
x x x x
Thus, unless the President issues a proclamation
withdrawing the Airport Lands and Buildings from public use, these
properties remain properties of public dominion and are inalienable.
Since the Airport Lands and Buildings are inalienable in their present
status as properties of public dominion, they are not subject to levy on
execution or foreclosure sale. As long as the Airport Lands and
Buildings are reserved for public use, their ownership remains with the
State or the Republic of the Philippines.
The authority of the President to reserve lands of
the public domain for public use, and to withdraw such public use, is
reiterated in Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, which states:
x x x x
There is no question, therefore, that unless the
Airport Lands and Buildings are withdrawn by law or presidential
proclamation from public use, they are properties of public dominion,
owned by the Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and
Buildings in trust for the Republic. Section 48, Chapter 12, Book I of
the Administrative Code allows instrumentalities like MIAA to hold title
to real properties owned by the Republic, thus:
x x x x
In MIAA’s case, its status as a mere trustee of the
Airport Lands and Buildings is clearer because even its executive head
cannot sign the deed of conveyance on behalf of the Republic. Only the
President of the Republic can sign such deed of conveyance.
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA
the title to the Airport Lands and Buildings from the Bureau of Air
Transportation of the Department of Transportation and Communications.
The MIAA Charter provides:
x x x x
The MIAA Charter transferred the Airport Lands and
Buildings to MIAA without the Republic receiving cash, promissory notes
or even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the
rationale for the transfer of the Airport Lands and Buildings to MIAA,
thus:
x x x x
The transfer of the Airport Lands and Buildings from
the Bureau of Air Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to MIAA. The
purpose was merely to reorganize a division in the Bureau of Air
Transportation into a separate and autonomous body. The Republic remains
the beneficial owner of the Airport Lands and Buildings. MIAA itself is
owned solely by the Republic. No party claims any ownership rights over
MIAA’s assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport
Lands and Buildings "shall not be disposed through sale or through any
other mode unless specifically approved by the President of the
Philippines." This only means that the Republic retained the beneficial
ownership of the Airport Lands and Buildings because under Article 428
of the Civil Code, only the "owner has the right to x x x dispose of a
thing." Since MIAA cannot dispose of the Airport Lands and Buildings,
MIAA does not own the Airport Lands and Buildings.
At any time, the President can transfer back to the
Republic title to the Airport Lands and Buildings without the Republic
paying MIAA any consideration. Under Section 3 of the MIAA Charter, the
President is the only one who can authorize the sale or disposition of
the Airport Lands and Buildings. This only confirms that the Airport
Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts
from real estate tax any "[r]eal property owned by the Republic of the
Philippines." Section 234(a) provides:
x x x x
This exemption should be read in relation with
Section 133(o) of the same Code, which prohibits local governments from
imposing "[t]axes, fees or charges of any kind on the National
Government, its agencies and instrumentalities x x x." The real
properties owned by the Republic are titled either in the name of the
Republic itself or in the name of agencies or instrumentalities of the
National Government. The Administrative Code allows real property owned
by the Republic to be titled in the name of agencies or
instrumentalities of the national government. Such real properties
remain owned by the Republic and continue to be exempt from real estate
tax.
The Republic may grant the beneficial use of its real
property to an agency or instrumentality of the national government.
This happens when title of the real property is transferred to an agency
or instrumentality even as the Republic remains the owner of the real
property. Such arrangement does not result in the loss of the tax
exemption. Section 234(a) of the Local Government Code states that real
property owned by the Republic loses its tax exemption only if the
"beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person." MIAA, as a government instrumentality,
is not a taxable person under Section 133(o) of the Local Government
Code. Thus, even if we assume that the Republic has granted to MIAA the
beneficial use of the Airport Lands and Buildings, such fact does not
make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings
that MIAA leases to private entities are not exempt from real estate
tax. For example, the land area occupied by hangars that MIAA leases to
private corporations is subject to real estate tax. In such a case, MIAA
has granted the beneficial use of such land area for a consideration to
a taxable person and therefore such land area is subject to real estate
tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:
x x x x17
In the ultimate, I submit that the two rulings do not
really contradict, but, instead, complement each one. Mactan Cebu
provides the proper rule that, in order to determine whether airport
properties are exempt from real property tax, it is Section 234, not
Section 133, of the LGC that should be determinative of the properties
exempt from the said tax. MIAA then lays down the correct doctrine that
airport properties are of public dominion pertaining to the state,
hence, falling within the ambit of Section 234(a) of the LGC.
However, because of the confusion generated by the
apparently conflicting decisions, a fine tuning of Mactan Cebu and MIAA
is imperative.
IV.
Parenthetically, while the basis of a real property tax assessment is actual use,18 the tax itself is directed to the ownership of the lands and buildings or other improvements thereon.19
Public policy considerations dictate that property of the State and of
its municipal subdivisions devoted to governmental uses and purposes is
generally exempt from taxation although no express provision in the law
is made therefor.20
In the instant case, the legislature specifically provided that real
property owned by the Republic of the Philippines or any of its
political subdivisions is exempt from real property tax, except, of
course, when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person. The principal basis of
the exemption is likewise ownership.21
Indeed, emphasis should be made on the ownership of
the property, rather than on the airport Authority being a taxable
entity. This strategy makes it unnecessary to determine whether MIAA is
an instrumentality or a GOCC, as painstakingly expounded by the ponente.
Likewise, this approach provides a convenient escape
from Justice Tinga’s proposition that the MIAA is a taxable entity
liable to pay real property taxes, but the airport properties are exempt
from levy on execution to satisfy the tax liability. I fear that this
hypothesis may trench on the Constitutional principle of uniformity of
taxation,22
because a tax lawfully levied and assessed against a taxable
governmental entity will not be lienable while like assessments against
all other taxable entities of the same tax district will be lienable.23
The better option, then, is for the Court to
concentrate on the nature of the tax as a tax on ownership and to
directly apply the pertinent real property tax provisions of the LGC,
specifically those dealing with the exemption based on ownership, to the
case at bar.
The phrase, "property owned by the Republic" in
Section 234, actually refers to those identified as public property in
our laws. Following MIAA, we go to Articles 420 and 421 of the Civil
Code which provide:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being
for public use, and are intended for some public service or for the
development of the national wealth.
Art. 421. All other property of the State, which is
not of the character stated in the preceding article, is patrimonial
property.
From the afore-quoted, we readily deduce that airport
properties are of public dominion. The "port" in the enumeration
certainly includes an airport. With its beacons, landing fields,
runways, and hangars, an airport is analogous to a harbor with its
lights, wharves and docks; the one is the landing place and haven of
ships that navigate the water, the other of those that navigate the air.24 Ample authority further supports the proposition that the term "roads" include runways and landing strips.25 Airports, therefore, being properties of public dominion, are of the Republic.
At this point, I cannot help but air the observation
that the legislature may have really intended the phrase "owned by the
Republic" in Section 234 to refer to, among others, properties of public
dominion. This is because "public dominion" does not carry the idea of
ownership. Tolentino, an authority in civil law, explains:
This article shows that there is a distinction
between dominion and ownership. Private ownership is defined elsewhere
in the Code; but the meaning of public dominion is nowhere defined. From
the context of various provisions, it is clear that public dominion
does not carry the idea of ownership; property of public dominion is not
owned by the State, but pertains to the State, which as territorial
sovereign exercises certain juridical prerogatives over such property.
The ownership of such property, which has the special characteristics of
a collective ownership for the general use and enjoyment, by virtue of
their application to the satisfaction of the collective needs, is in the
social group, whether national, provincial, or municipal. Their purpose
is not to serve the State as a juridical person, but the citizens; they
are intended for the common and public welfare, and so they cannot be
the object of appropriation, either by the State or by private persons.
The relation of the State to this property arises from the fact that the
State is the juridical representative of the social group, and as such
it takes care of them, preserves them and regulates their use for the
general welfare.26
Be that as it may, the legislative intent to exempt
from real property tax the properties of the Republic remains clear. The
soil constituting the NAIA airport and the runways cannot be taxed,
being properties of public dominion and pertaining to the Republic. This
is true even if the title to the said property is in the name of MIAA.
Practical ownership, rather than the naked legal title, must control,
particularly because, as a matter of practice, the record title may be
in the name of a government agency or department rather than in the name
of the Republic.
In this case, even if MIAA holds the record title
over the airport properties, such holding can only be for the benefit of
the Republic,27 especially when we consider that MIAA exercises an essentially public function.28
Further, where property, the title to which is in the name of the
principal, is immune from taxes, it remains immune even if the title is
standing in the name of an agent or trustee for such principal.29
Properties of public dominion are held in trust by the state or the Republic for the people.30
The national government and the bodies it has created that exercise
delegated authority are, pursuant to the general principles of public
law, mere agents of the Republic. Here, insofar as it deals with the
subject properties, MIAA, a governmental creation exercising delegated
powers, is a mere agent of the Republic, and the latter, to repeat, is
the trustee of the properties for the benefit of all the people.31
Our ruling in MIAA, therefore, insofar as it holds
that the airport Authority is a "trustee of the Republic," may not have
been precise. It would have been more sound, legally that is, to
consider the relationship between the Republic and the airport Authority
as principal and agent, rather than as trustor and trustee.
The history of the subject airport attests to this proposition, thus:
The country's premier airport was originally a US Air
Force Base, which was turned over to the Philippine government in 1948.
It started operations as a civil aviation airport with meager
facilities, then consisting of the present domestic runway as its sole
landing strip, and a small building northwest of this runway as its sole
passenger terminal.
The airport's international runway and associated
taxiway were built in 1953; followed in 1961 by the construction of a
control tower and a terminal building for the exclusive use of
international passengers at the southwest intersection of the two
runways. These structures formed the key components of an airport system
that came to be known as the Manila International Airport (MIA).
Like other national airports, the MIA was first
managed and operated by the National Airports Corporation, an agency
created on June 5, 1948 by virtue of Republic Act No. 224. This was
abolished in 1951 and [in] its stead, the MIA Division was created under
the Civil Aeronautics Administration (CAA) of the Department of
Commerce and Industry.
On October 19, 1956, the entire CAA, including the
MIA Division, was transferred to the Department of Public Works,
Transportation and Communications.
In 1979, the CAA was renamed Bureau of Air
Transportation following the creation of an exclusive Executive
Department for Transportation and Communications.
It is worthwhile to note at this point that while the
MIA General Manager then carried the rank of a Division Chief only, it
became a matter of policy and practice that he be appointed by no less
than the President of the Philippines since the magnitude of its impact
on the country's economy has acquired such national importance and
recognition.
During the seventies, the Philippine tourism and
industry experienced a phenomenal upsurge in the country's manpower
exports, resulting in more international flight frequencies to Manila
which grew by more than four times.
Executive Order No. 381 promulgated by then President
Marcos authorized the development of Manila International Airport to
meet the needs of the coming decades.
A feasibility study/airport master plan was drawn up
in 1973 by Airways Engineering Corporation, the financing of which was
source[d] from a US$29.6 Million loan arranged with the Asian
Development Bank (ADB). The detailed Engineering Design of the new MIA
Development Project (MIADP) was undertaken by
Renardet-Sauti/Transplan/F.F. Cruz Consultants while the design of the
IPT building was prepared by Architect L.V. Locsin and Associates.
In 1974, the final engineering design was adopted by
the Philippine Government. This was concurred by the ADB on September
18, 1975 and became known as the "Scheme E-5 Modified Plan." Actual work
on the project started in the second quarter of 1978.
On March 4, 1982, EXECUTIVE ORDER NO. 778 was signed
into law, abolishing the MIA Division under the BAT and creating in its
stead the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), vested with the
power to administer and operate the Manila International Airport (MIA).
Though MIAA was envisioned to be autonomous, Letter
of Instructions (LOI) No. 1245, signed 31 May 1982, clarified that for
purpose of policy integration and program coordination, the MIAA
Management shall be under the general supervision but not control of the
then Ministry of Transportation and Communications.
On July 21, 1983, Executive Order No. 903 was
promulgated, providing that 65% of MIAA's annual gross operating income
be reverted to the general fund for the maintenance and operation of
other international and domestic airports in the country. It also scaled
down the equity contribution of the National Government to MIAA: from
PhP 10 billion to PhP 2.5 billion and removed the provision exempting
MIAA from the payment of corporate tax.
Another revision in the MIAA Charter followed with
the promulgation of Executive Order No. 909, signed September 16, 1983,
increasing the membership of the MIAA Board to nine (9) Directors with
the inclusion of two other members to be appointed by the Philippine
President.
The last amendment to the MIAA Charter was made on
July 26, 1987 through Executive Order No. 298 which provided for a more
realistic income sharing arrangement between MIAA and the National
Government. It provided that instead of the 65% of gross operating
income, only 20% of MIAA's gross income, exclusive of income generated
from the passenger terminal fees and utility charges, shall revert to
the general fund of the National Treasury. EO 298 also reorganized the
MIAA Board and raised the capitalization to its original magnitude of
PhP 10 billion.
The post 1986 Revolution period will not be complete
without mention of the renaming of MIA to Ninoy Aquino International
Airport with the enactment of Republic Act No. 6639 on August 17, 1987.
While this legislation renamed the airport complex, the MIA Authority
would still retain its corporate name since it did not amend the
original or revised charters of MIAA.32
The MIAA Charter further provides that any portion of
the airport cannot be disposed of by the Authority through sale or
through any other mode unless specifically approved by the President of
the Philippines.33
It is also noted that MIAA’s board of directors is practically
controlled by the national government, the members thereof being
officials of the executive branch.34
Likewise, the Authority cannot levy and collect dues, charges, fees or
assessments for the use of the airport premises, works, appliances,
facilities or concessions, or for any service provided by it, without
the approval of several executive departments.35
These provisions are consistent with an agency relationship. Let it be
remembered that one of the principal elements of an agency relationship
is the existence of some degree of control by the principal over the
conduct and activities of the agent. In this regard, while an agent
undertakes to act on behalf of his principal and subject to his control,
a trustee as such is not subject to the control of the beneficiary,
except that he is under a duty to deal with the trust property for the
latter’s benefit in accordance with the terms of the trust and can be
compelled by the beneficiary to perform his duty.36
Finally, to consider MIAA as a "trustee of the
Republic" will sanction the technical creation of a second trust in
which the Republic, which is already a trustee, becomes the second
trustor and the airport Authority a second trustee. Although I do not
wish to belabor the point, I submit that the validity of such a scenario
appears doubtful. Sufficient authority, however, supports the
proposition that a trustee can delegate his duties to an agent provided
he properly supervises and controls the agent’s conduct.37
In this case, we can rightly say that the Republic, as the trustee of
the public dominion airport properties for the benefit of the people,
has delegated to MIAA the administration of the said properties subject,
as shown above, to the executive department’s supervision and control.
In fine, the properties comprising the NAIA being of
public dominion which pertain to the State, the same should be exempt
from real property tax following Section 234(a) of the LGC.
One last word. Given the foregoing disquisition, I
find no necessity for this Court to abandon its ruling in Mactan. On the
premise that the rationale for exempting airport properties from
payment of real estate taxes is ownership thereof by the Republic, the
Mactan ruling is impeccable in its logic and its conclusion should
remain undisturbed. Having harmonized the apparently divergent views, we
need no longer fear any fierce disagreements in the future.
I therefore vote to grant the petition.
ANTONIO EDUARDO B. NACHURAAssociate Justice
Footnotes
1
Manila International Airport Authority (MIAA) v. Court of Appeals, G.R.
No. 155650, July 20, 2006, 495 SCRA 591; Mactan Cebu International
Airport Authority (MCIAA) v. Marcos, 330 Phil. 392 (1996).
2 Villanueva, et al. v. City of Iloilo, 135 Phil. 572, 582-583 (1968).
3 Approved on October 10, 1991 and became effective on January 1, 1992.
4 Emphasis supplied.
5 Id.
6 Id.
7 Id.
8 Supra note 1.
9 Id. at 413-414.
10 Supra note 1.
11 Id. at 645-646.
12
Municipality of Nueva Era, Ilocos Norte v. Municipality of Marcos,
Ilocos Norte, G.R. No. 169435, February 27, 2008, 547 SCRA 71, 95-96.
13 Lichauco & Co. v. Apostol and Corpus, 44 Phil 138, 146 (1922).
14 Id. at 147.
15 MCIAA v. Marcos, supra note 1, at 410-411.
16 Id. at 418-419. (Emphasis supplied, citations omitted.)
17 Manila International Airport Authority v. Court of Appeals, supra note 10, at 621-630. (Emphasis supplied, citations omitted.)
18 See Sec. 198 of R.A. No. 7160.
19 Supra note 2.
20 Aban, Law of Basic Taxation in the Philippines, 2001 ed., p. 64.
21 See Platte Valley Public Power and Irrigation Dist. v. Lincoln County, http://web2. westlaw.com/find/default.wl?serialnum=1938119037&rs=WLW9.02&ifm=NotSet&fn=_top&sv=Split&
usid=59 DF9F1FF3704AC28842C820B8583A26&findtype=Y&ordoc=1938119037&db=CA-ORCS&utid=%7B4BAA61 EB-FC83-4D86-
AD7A-9CEDE721AC65%7D&vr=2.0&rp=%2Ffind%2Fdefault.wl&mt=CommercialPrac 144 Neb. 584, 586; 14 N.W.2d 202, 204 (1944).
22 See 1987 CONSTITUTION, Art. VI, Sec. 28(1).
23 Borough of Homestead v. Defense Plant Corporation, 356 Pa. 500, 508; 52 A.2d 581, 586 (1947).
24 Hale v. Sullivan, 146 Colo. 512, 516; 362 P.2d 402, 404 (1961).
25 Id. at 518.
26
Tolentino, Civil Code of the Philippines, Vol. II, 1983 ed., p. 28; see
also Laurel v. Garcia, G.R. Nos. 92013 and 92047, July 25, 1990, 187
SCRA 797.
27 See Rohr Aircraft Corporation v. County of San Diego, 362 U.S. 628, 634-635; 80 S.Ct. 1050, 1054 (1960).
28
Hanover v. Town of Morristown, 4 N.J.Super. 22, 24; 66 A.2d 187, 188
(1949); People ex rel. Lawless v. City of Quincy, 395 Ill. 190, 201; 69
N.E.2d 892, 897 (1946); People ex rel. Curren v. Wood, 391 Ill. 237,
241; 62 N.E.2d 809, 812 (1945); Macclintock v. City of Roseburg, 127 Or.
698, 701; 273 P. 331-332 (1929).
29
Pacific Grove-Asilomar Operating Corp. v. Count of Monterey, 43
Cal.App.3d 675, 684; 117 Cal.Rptr. 874, 880 (1974); United States Spruce
Production Corporation v. Lincoln County, 285 F. 388, 391 (1922).
30 See Kock Wing v. Philippine Railway Co., 54 Phil. 438, 444 (1930).
31 See United States of America v. Ruby Company, 588 F.2d 697, 704 (1978).
32 http://125.60.203.88/miaa/AIRPORT/index.asp (visited Feb. 23, 2009).
33
Executive Order (E.O.) No. 903, entitled "Providing for a Revision of
Executive Order No. 778 Creating the Manila International Airport
Authority, Transferring Existing Assets of the Manila International
Airport to the Authority, and Vesting the Authority with Power to
Administer and Operate the Manila International Airport, issued on July
21, 1983, provides in its Section 3 the following:
Sec. 3. Creation of the Manila International Airport
Authority. There is hereby established a body corporate to be known as
the Manila International Airport Authority which shall be attached to
the Ministry of Transportation and Communications. The principal office
of the Authority shall be located at the New Manila International
Airport. The Authority may establish such offices, branches, agencies or
subsidiaries as it may deem proper and necessary; Provided, That any
subsidiary that may be organized shall have the prior approval of the
President.
The land where the Airport is presently located as
well as the surrounding land area of approximately six hundred hectares,
are hereby transferred, conveyed and assigned to the ownership and
administration of the Authority, subject to existing rights, if any. The
Bureau of Lands and other appropriate government agencies shall
undertake an actual survey of the area transferred within one year from
the promulgation of this Executive Order and the corresponding title to
be issued in the name of the Authority. Any portion thereof shall not
be disposed through sale or through any other mode unless specifically
approved by the President of the Philippines. (Underscoring ours.)
34
E.O. No. 909, entitled "Amending Section 7 of Executive Order No. 778,
Creating the Manila International Airport Authority, by Increasing the
Membership in the Board of Directors to Nine Members," issued on
September 16, 1983, pertinently provides in its Section 1 the following:
Sec. 1. Section 7 of Executive Order 778, dated 04 March 1982, is hereby amended to read as follows:
"Sec. 7. Board of Directors. The corporate powers of
the Authority shall be exercised by and vested in a Board of NINE (9)
members, which shall be composed of a Chairman, a Vice-Chairman and
SEVEN (7) members. The Minister of Transportation & Communications
shall be the ex-officio Chairman of the Board. The General Manager of
the Authority shall be the ex-officio Vice-Chairman of the Board. The
Minister of Finance, the Minister of Tourism, the Presidential Executive
Assistant, the Chief of Staff of the Armed Forces of the Philippines,
and Commissioner of Immigration & Deportation shall be the
ex-officio members. TWO OTHER MEMBERS SHALL BE APPOINTED BY THE
PRESIDENT UPON THE RECOMMENDATION OF THE BOARD.
x x x x."
35 Sec. 5(k) of E.O. No. 903 provides:
Sec. 5. Functions, Powers, and Duties. The Authority shall have the following functions, powers and duties:
x x x x
(k) To levy and collect dues, charges, fees or
assessments for the use of the airport premises, works, appliances,
facilities or concessions, or for any service provided by the Authority,
subject to the approval of the Minister of Transportation and
Communications in consultation with the Minister of Finance, and subject
further to the provisions of Batas Pambansa Blg. 325 where applicable.
36 76 Am Jur 2d, Trusts § 13 citing 3 Am Jur 2d, Agency § 2 and Restatement 2d, Trusts § 8, Comment b.
37
Walters-Southland Institute v. Walker, 222 Ark. 857, 861; 263 S.W.2d
83, 84 (1954); see Welsh v. Griffin, 179 Cal.App.2d 207, 215; 3
Cal.Rptr. 7
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