THIRD DIVISION
G.R. No. 191109 July 18, 2012REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY (PRA), Petitioner,
vs.
CITY OF PARANAQUE, Respondent.
D E C I S I O N
MENDOZA, J.:
This is a petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, on pure questions of law,
assailing the January 8, 2010 Order1
of the Regional Trial Court, Branch 195, Parafiaque City (RTC), which
ruled that petitioner Philippine Reclamation Authority (PRA) is a
government-owned and controlled corporation (GOCC), a taxable entity,
and, therefore, . not exempt from payment of real property taxes. The
pertinent portion of the said order reads:
In view of the finding of this court that petitioner
is not exempt from payment of real property taxes, respondent Parañaque
City Treasurer Liberato M. Carabeo did not act xxx without or in excess
of jurisdiction, or with grave abuse of discretion amounting to lack or
in excess of jurisdiction in issuing the warrants of levy on the subject
properties.
WHEREFORE, the instant petition is dismissed. The
Motion for Leave to File and Admit Attached Supplemental Petition is
denied and the supplemental petition attached thereto is not admitted.
The Public Estates Authority (PEA) is a government
corporation created by virtue of Presidential Decree (P.D.) No. 1084
(Creating the Public Estates Authority, Defining its Powers and
Functions, Providing Funds Therefor and For Other Purposes) which took
effect on February 4,
1977 to provide a coordinated, economical and
efficient reclamation of lands, and the administration and operation of
lands belonging to, managed and/or operated by, the government with the
object of maximizing their utilization and hastening their development
consistent with public interest.
On February 14, 1979, by virtue of Executive Order
(E.O.) No. 525 issued by then President Ferdinand Marcos, PEA was
designated as the agency primarily responsible for integrating,
directing and coordinating all reclamation projects for and on behalf of
the National Government.
On October 26, 2004, then President Gloria
Macapagal-Arroyo issued E.O. No. 380 transforming PEA into PRA, which
shall perform all the powers and functions of the PEA relating to
reclamation activities.
By virtue of its mandate, PRA reclaimed several
portions of the foreshore and offshore areas of Manila Bay, including
those located in Parañaque City, and was issued Original Certificates of
Title (OCT Nos. 180, 202, 206, 207, 289, 557, and 559) and Transfer
Certificates of Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and
9686) over the reclaimed lands.
On February 19, 2003, then Parañaque City Treasurer
Liberato M. Carabeo (Carabeo) issued Warrants of Levy on PRA’s reclaimed
properties (Central Business Park and Barangay San Dionisio) located in
Parañaque City based on the assessment for delinquent real property
taxes made by then Parañaque City Assessor Soledad Medina Cue for tax
years 2001 and 2002.
On March 26, 2003, PRA filed a petition for
prohibition with prayer for temporary restraining order (TRO) and/or
writ of preliminary injunction against Carabeo before the RTC.
On April 3, 2003, after due hearing, the RTC issued
an order denying PRA’s petition for the issuance of a temporary
restraining order.
On April 4, 2003, PRA sent a letter to Carabeo
requesting the latter not to proceed with the public auction of the
subject reclaimed properties on April 7, 2003. In response, Carabeo sent
a letter stating that the public auction could not be deferred because
the RTC had already denied PRA’s TRO application.
On April 25, 2003, the RTC denied PRA’s prayer for
the issuance of a writ of preliminary injunction for being moot and
academic considering that the auction sale of the subject properties on
April 7, 2003 had already been consummated.
On August 3, 2009, after an exchange of several
pleadings and the failure of both parties to arrive at a compromise
agreement, PRA filed a Motion for Leave to File and Admit Attached
Supplemental Petition which sought to declare as null and void the
assessment for real property taxes, the levy based on the said
assessment, the public auction sale conducted on April 7, 2003, and the
Certificates of Sale issued pursuant to the auction sale.
On January 8, 2010, the RTC rendered its decision
dismissing PRA’s petition. In ruling that PRA was not exempt from
payment of real property taxes, the RTC reasoned out that it was a GOCC
under Section 3 of P.D. No. 1084. It was organized as a stock
corporation because it had an authorized capital stock divided into no
par value shares. In fact, PRA admitted its corporate personality and
that said properties were registered in its name as shown by the
certificates of title. Therefore, as a GOCC, local tax exemption is
withdrawn by virtue of Section 193 of Republic Act (R.A.) No. 7160 Local
Government Code (LGC) which was the prevailing law in 2001 and 2002
with respect to real property taxation. The RTC also ruled that the tax
exemption claimed by PRA under E.O. No. 654 had already been expressly
repealed by R.A. No. 7160 and that PRA failed to comply with the
procedural requirements in Section 206 thereof.
Not in conformity, PRA filed this petition for certiorari assailing the January 8, 2010 RTC Order based on the following GROUNDS
ITHE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS LIABLE TO PAY REAL PROPERTY TAX ON THE SUBJECT RECLAIMED LANDS CONSIDERINGTHAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF THE NATIONAL GOVERNMENT AND IS, THEREFORE, EXEMPT FROM PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS 234(A) AND 133(O) OF REPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODE VIS-À-VIS MANILA INTERNATIONAL AIRPORT AUTHORITY V. COURT OF APPEALS.IITHE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE, EXEMPT FROM REAL PROPERTY TAX.
PRA asserts that it is not a GOCC under Section 2(13)
of the Introductory Provisions of the Administrative Code. Neither is
it a GOCC under Section 16, Article XII of the 1987 Constitution because
it is not required to meet the test of economic viability. Instead, PRA
is a government instrumentality vested with corporate powers and
performing an essential public service pursuant to Section 2(10) of the
Introductory Provisions of the Administrative Code. Although it has a
capital stock divided into shares, it is not authorized to distribute
dividends and allotment of surplus and profits to its stockholders.
Therefore, it may not be classified as a stock corporation because it
lacks the second requisite of a stock corporation which is the
distribution of dividends and allotment of surplus and profits to the
stockholders.
It insists that it may not be classified as a
non-stock corporation because it has no members and it is not organized
for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or
similar purposes, like trade, industry, agriculture and like chambers
as provided in Section 88 of the Corporation Code.
Moreover, PRA points out that it was not created to
compete in the market place as there was no competing reclamation
company operated by the private sector. Also, while PRA is vested with
corporate powers under P.D. No. 1084, such circumstance does not make it
a corporation but merely an incorporated instrumentality and that the
mere fact that an incorporated instrumentality of the National
Government holds title to real property does not make said
instrumentality a GOCC. Section 48, Chapter 12, Book I of the
Administrative Code of 1987 recognizes a scenario where a piece of land
owned by the Republic is titled in the name of a department, agency or
instrumentality.
Thus, PRA insists that, as an incorporated
instrumentality of the National Government, it is exempt from payment of
real property tax except when the beneficial use of the real property
is granted to a taxable person. PRA claims that based on Section 133(o)
of the LGC, local governments cannot tax the national government which
delegate to local governments the power to tax.
It explains that reclaimed lands are part of the
public domain, owned by the State, thus, exempt from the payment of real
estate taxes. Reclaimed lands retain their inherent potential as areas
for public use or public service. While the subject reclaimed lands are
still in its hands, these lands remain public lands and form part of the
public domain. Hence, the assessment of real property taxes made on
said lands, as well as the levy thereon, and the public sale thereof on
April 7, 2003, including the issuance of the certificates of sale in
favor of the respondent Parañaque City, are invalid and of no force and
effect.
On the other hand, the City of Parañaque (respondent)
argues that PRA since its creation consistently represented itself to
be a GOCC. PRA’s very own charter (P.D. No. 1084) declared it to be a
GOCC and that it has entered into several thousands of contracts where
it represented itself to be a GOCC. In fact, PRA admitted in its
original and amended petitions and pre-trial brief filed with the RTC of
Parañaque City that it was a GOCC.
Respondent further argues that PRA is a stock
corporation with an authorized capital stock divided into 3 million no
par value shares, out of which 2 million shares have been subscribed and
fully paid up. Section 193 of the LGC of 1991 has withdrawn tax
exemption privileges granted to or presently enjoyed by all persons,
whether natural or juridical, including GOCCs.
Hence, since PRA is a GOCC, it is not exempt from the payment of real property tax.
THE COURT’S RULING
The Court finds merit in the petition.
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a GOCC as follows:
SEC. 2. General Terms Defined. – x 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: x x x.
On the other hand, Section 2(10) of the Introductory
Provisions of the Administrative Code defines a government
"instrumentality" as follows:
SEC. 2. General Terms Defined. –– x 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. x x x
From the above definitions, it is clear that a GOCC
must be "organized as a stock or non-stock corporation" while an
instrumentality is vested by law with corporate powers. Likewise, when
the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery
although not integrated with the department framework.
When the law vests in a government instrumentality
corporate powers, the instrumentality does not necessarily 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.
Many government instrumentalities are vested with
corporate powers but they do not become stock or non-stock corporations,
which is a necessary condition before an agency or instrumentality is
deemed a GOCC. Examples are the Mactan International Airport Authority,
the Philippine Ports Authority, the University of the Philippines, and
Bangko Sentral ng Pilipinas. All these government instrumentalities
exercise corporate powers but they are not organized as stock or
non-stock corporations as required by Section 2(13) of the Introductory
Provisions of the Administrative Code. These government
instrumentalities are sometimes loosely called government corporate
entities. They are not, however, GOCCs in the strict sense as understood
under the Administrative Code, which is the governing law defining the
legal relationship and status of government entities.2
Correlatively, 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." Section 87 thereof defines a non-stock corporation as
"one where no part of its income is distributable as dividends to its
members, trustees or officers." Further, Section 88 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."
Two requisites must concur before one may be
classified as a stock corporation, namely: (1) that it has capital stock
divided into shares; and (2) that it is authorized to distribute
dividends and allotments of surplus and profits to its stockholders. If
only one requisite is present, it cannot be properly classified as a
stock corporation. As for non-stock corporations, they must have members
and must not distribute any part of their income to said members.3
In the case at bench, PRA is not a GOCC because it is
neither a stock nor a non-stock corporation. It cannot be considered as
a stock corporation because although it has a capital stock divided
into no par value shares as provided in Section 74
of P.D. No. 1084, it is not authorized to distribute dividends, surplus
allotments or profits to stockholders. There is no provision whatsoever
in P.D. No. 1084 or in any of the subsequent executive issuances
pertaining to PRA, particularly, E.O. No. 525,5 E.O. No. 6546 and EO No. 7987 that authorizes PRA to distribute dividends, surplus allotments or profits to its stockholders.
PRA cannot be considered a non-stock corporation
either because it does not have members. A non-stock corporation must
have members.8
Moreover, it was not organized for any of the purposes mentioned in
Section 88 of the Corporation Code. Specifically, it was created to
manage all government reclamation projects.
Furthermore, there is another reason why the PRA
cannot be classified as a GOCC. Section 16, Article XII of the 1987
Constitution provides as follows:
Section 16. The Congress shall not, except by general
law, provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may be created
or established by special charters in the interest of the common good
and subject to the test of economic viability.
The fundamental provision above authorizes Congress
to create GOCCs through special charters on two conditions: 1) the GOCC
must be established for the common good; and 2) the GOCC must meet the
test of economic viability. In this case, PRA may have passed the first
condition of common good but failed the second one - economic viability.
Undoubtedly, the purpose behind the creation of PRA was not for
economic or commercial activities. Neither was it created to compete in
the market place considering that there were no other competing
reclamation companies being operated by the private sector. As mentioned
earlier, PRA was created essentially to perform a public service
considering that it was primarily responsible for a coordinated,
economical and efficient reclamation, administration and operation of
lands belonging to the government with the object of maximizing their
utilization and hastening their development consistent with the public
interest. Sections 2 and 4 of P.D. No. 1084 reads, as follows:
Section 2. Declaration of policy. It is the declared
policy of the State to provide for a coordinated, economical and
efficient reclamation of lands, and the administration and operation of
lands belonging to, managed and/or operated by the government, with the
object of maximizing their utilization and hastening their development
consistent with the public interest.
Section 4. Purposes. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal
in, subdivide, dispose, lease and sell any and all kinds of lands,
buildings, estates and other forms of real property, owned, managed,
controlled and/or operated by the government.
(c) To provide for, operate or administer such
services as may be necessary for the efficient, economical and
beneficial utilization of the above properties.
The twin requirement of common good and economic
viability was lengthily discussed in the case of Manila International
Airport Authority v. Court of Appeals,9 the pertinent portion of which reads:
Third, the government-owned or controlled
corporations created through special charters are those that meet the
two conditions prescribed in Section 16, Article XII of the
Constitution.
The first condition is that the government-owned or
controlled corporation must be established for the common good. The
second condition is that the government-owned or controlled corporation
must meet the test of economic viability. Section 16, Article XII of the
1987 Constitution provides:
SEC. 16. The Congress shall not, except by general
law, provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may be created
or established by special charters in the interest of the common good
and subject to the test of economic viability.
The Constitution expressly authorizes the legislature
to create "government-owned or controlled corporations" through special
charters only if these entities are required to meet the twin
conditions of common good and economic viability. In other words,
Congress has no power to create government-owned or controlled
corporations with special charters unless they are made to comply with
the two conditions of common good and economic viability. The test of
economic viability applies only to government-owned or controlled
corporations that perform economic or commercial activities and need to
compete in the market place. Being essentially economic vehicles of the
State for the common good — meaning for economic development purposes —
these government-owned or controlled corporations with special charters
are usually organized as stock corporations just like ordinary private
corporations.
In contrast, government instrumentalities vested with
corporate powers and performing governmental or public functions need
not meet the test of economic viability. These instrumentalities perform
essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not
be economically viable since the government may even subsidize their
entire operations. These instrumentalities are not the "government-owned
or controlled corporations" referred to in Section 16, Article XII of
the 1987 Constitution.
Thus, the Constitution imposes no limitation when the
legislature creates government instrumentalities vested with corporate
powers but performing essential governmental or public functions.
Congress has plenary authority to create government instrumentalities
vested with corporate powers provided these instrumentalities perform
essential government functions or public services. However, when the
legislature creates through special charters corporations that perform
economic or commercial activities, such entities — known as
"government-owned or controlled corporations" — must meet the test of
economic viability because they compete in the market place.
This is the situation of the Land Bank of the
Philippines and the Development Bank of the Philippines and similar
government-owned or controlled corporations, which derive their incometo
meet operating expenses solely from commercial transactions in
competition with the private sector. The intent of the Constitution is
to prevent the creation of government-owned or controlled corporations
that cannot survive on their own in the market place and thus merely
drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of
economic viability, explained to the Constitutional Commission the
purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this
concern is really that when the government creates a corporation, there
is a sense in which this corporation becomes exempt from the test of
economic performance. We know what happened in the past. If a government
corporation loses, then it makes its claim upon the taxpayers' money
through new equity infusions from the government and what is always
invoked is the common good. That is the reason why this year, out of a
budget of P115 billion for the entire government, about P28 billion of
this will go into equity infusions to support a few government financial
institutions. And this is all taxpayers' money which could have been
relocated to agrarian reform, to social services like health and
education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC
VIABILITY" together with the "common good," this becomes a restraint on
future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable.
And so, Madam President, I reiterate, for the committee's consideration
and I am glad that I am joined in this proposal by Commissioner Foz, the
insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST,"
together with the common good.1âwphi1
Father Joaquin G. Bernas, a leading member of the
Constitutional Commission, explains in his textbook The 1987
Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986
Constitutional Commission. The significant addition, however, is the
phrase "in the interest of the common good and subject to the test of
economic viability." The addition includes the ideas that they must show
capacity to function efficiently in business and that they should not
go into activities which the private sector can do better. Moreover,
economic viability is more than financial viability but also includes
capability to make profit and generate benefits not quantifiable in
financial terms.
Clearly, the test of economic viability does not
apply to government entities vested with corporate powers and performing
essential public services. The State is obligated to render essential
public services regardless of the economic viability of providing such
service. The non-economic viability of rendering such essential public
service does not excuse the State from withholding such essential
services from the public.
However, government-owned or controlled corporations
with special charters, organized essentially for economic or commercial
objectives, must meet the test of economic viability. These are the
government-owned or controlled corporations that are usually organized
under their special charters as stock corporations, like the Land Bank
of the Philippines and the Development Bank of the Philippines. These
are the government-owned or controlled corporations, along with
government-owned or controlled corporations organized under the
Corporation Code, that fall under the definition of "government-owned or
controlled corporations" in Section 2(10) of the Administrative Code.
[Emphases supplied]
This Court is convinced that PRA is not a GOCC either
under Section 2(3) of the Introductory Provisions of the Administrative
Code or under Section 16, Article XII of the 1987 Constitution. The
facts, the evidence on record and jurisprudence on the issue support the
position that PRA was not organized either as a stock or a non-stock
corporation. Neither was it created by Congress to operate commercially
and compete in the private market. Instead, PRA is a government
instrumentality vested with corporate powers and performing an essential
public service pursuant to Section 2(10) of the Introductory Provisions
of the Administrative Code. Being an incorporated government
instrumentality, it is exempt from payment of real property tax.
Clearly, respondent has no valid or legal basis in
taxing the subject reclaimed lands managed by PRA. On the other hand,
Section 234(a) of the LGC, in relation to its Section 133(o), exempts
PRA from paying realty taxes and protects it from the taxing powers of
local government units.
Sections 234(a) and 133(o) of the LGC provide, as follows:SEC. 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.
x x x x
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 x
(o) Taxes, fees or charges of any kinds on the
National Government, its agencies and instrumentalities, and local
government units. [Emphasis supplied]
It is clear from Section 234 that real property owned
by the Republic of the Philippines (the Republic) is exempt from real
property tax unless the beneficial use thereof has been granted to a
taxable person. In this case, there is no proof that PRA granted the
beneficial use of the subject reclaimed lands to a taxable entity. There
is no showing on record either that PRA leased the subject reclaimed
properties to a private taxable entity.
This exemption should be read in relation to Section
133(o) of the same Code, which prohibits local governments from imposing
"taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities x x x." 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.
Indeed, the Republic grants the beneficial use of its
real property to an agency or instrumentality of the national
government. This happens when the 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, unless "the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person."10
The rationale behind Section 133(o) has also been explained in the case of the Manila International Airport Authority,11 to wit:
Section 133(o) recognizes the basic principle that
local governments cannot tax the national government, which historically
merely delegated to local governments the power to tax. While the 1987
Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power "subject to
such guidelines and limitations as the Congress may provide."
When local governments invoke the power to tax on
national government instrumentalities, such power is construed strictly
against local governments. The rule is that a tax is never presumed and
there must be clear language in the law imposing the tax. Any doubt
whether a person, article or activity is taxable is resolved against
taxation. This rule applies with greater force when local governments
seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly
construed against the taxpayer claiming the exemption. However, when
Congress grants an exemption to a national government instrumentality
from local taxation, such exemption is construed liberally in favor of
the national government instrumentality. As this Court declared in
Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of
exemptions running to the benefit of the government itself or its
agencies. In such case the practical effect of an exemption is merely to
reduce the amount of money that has to be handled by government in the
course of its operations. For these reasons, provisions granting
exemptions to government agencies may be construed liberally, in favor
of non tax-liability of such agencies.
There is, moreover, no point in national and local
governments taxing each other, unless a sound and compelling policy
requires such transfer of public funds from one government pocket to
another.
There is also no reason for local governments to tax
national government instrumentalities for rendering essential public
services to inhabitants of local governments. The only exception is when
the legislature clearly intended to tax government instrumentalities
for the delivery of essential public services for sound and compelling
policy considerations. There must be express language in the law
empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved
against local governments.
Thus, Section 133 of the Local Government Code states
that "unless otherwise provided" in the Code, local governments cannot
tax national government instrumentalities. As this Court held in Basco
v. Philippine Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to
retard, impede, burden or in any manner control the operation of
constitutional laws enacted by Congress to carry into execution the
powers vested in the federal government. (MC Culloch v. Maryland, 4
Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made
reference to the entire absence of power on the part of the States to
touch, in that way (taxation) at least, the instrumentalities of the
United States (Johnson v. Maryland, 254 US 51) and it can be agreed that
no state or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from consummating its
federal responsibilities, or even to seriously burden it in the
accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p.
140, emphasis supplied)
Otherwise, mere creatures of the State can defeat
National policies thru extermination of what local authorities may
perceive to be undesirable activities or enterprise using the power to
tax as "a tool for regulation." (U.S. v. Sanchez, 340 US 42)
The power to tax which was called by Justice Marshall
as the "power to destroy" (McCulloch v. Maryland, supra) cannot be
allowed to defeat an instrumentality or creation of the very entity
which has the inherent power to wield it. [Emphases supplied]
The Court agrees with PRA that the subject reclaimed
lands are still part of the public domain, owned by the State and,
therefore, exempt from payment of real estate taxes.
Section 2, Article XII of the 1987 Constitution reads in part, as follows:
Section 2. 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. With the
exception of agricultural lands, all other natural resources shall not
be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State.
The State may directly undertake such activities, or it may enter into
co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least 60 per
centum of whose capital is owned by such citizens. Such agreements may
be for a period not exceeding twenty-five years, renewable for not more
than twenty-five years, and under such terms and conditions as may
provided by law. In cases of water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of waterpower,
beneficial use may be the measure and limit of the grant.
Similarly, Article 420 of the Civil Code enumerates properties belonging to the State:
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. [Emphases supplied]
Here, the subject lands are reclaimed lands,
specifically portions of the foreshore and offshore areas of Manila Bay.
As such, these lands remain public lands and form part of the public
domain. In the case of Chavez v. Public Estates Authority and AMARI
Coastal Development Corporation,12
the Court held that foreshore and submerged areas irrefutably belonged
to the public domain and were inalienable unless reclaimed, classified
as alienable lands open to disposition and further declared no longer
needed for public service. The fact that alienable lands of the public
domain were transferred to the PEA (now PRA) and issued land patents or
certificates of title in PEA’s name did not automatically make such
lands private. This Court also held therein that reclaimed lands
retained their inherent potential as areas for public use or public
service.
As the central implementing agency tasked to
undertake reclamation projects nationwide, with authority to sell
reclaimed lands, PEA took the place of DENR as the government agency
charged with leasing or selling reclaimed lands of the public domain.
The reclaimed lands being leased or sold by PEA are not private lands,
in the same manner that DENR, when it disposes of other alienable lands,
does not dispose of private lands but alienable lands of the public
domain. Only when qualified private parties acquire these lands will the
lands become private lands. In the hands of the government agency
tasked and authorized to dispose of alienable of disposable lands of the
public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA
"shall hold lands of the public domain" as well as "any and all kinds of
lands." PEA can hold both lands of the public domain and private lands.
Thus, the mere fact that alienable lands of the public domain like the
Freedom Islands are transferred to PEA and issued land patents or
certificates of title in PEA's name does not automatically make such
lands private.13
Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, thus:
SEC 14. Power to Reserve Lands of the Public and Private Dominion of the Government.-
(1)The President shall have the power to reserve for
settlement or public use, and for specific public purposes, any of the
lands of the public domain, the use of which is not otherwise directed
by law. The reserved land shall thereafter remain subject to the
specific public purpose indicated until otherwise provided by law or
proclamation.
Reclaimed lands such as the subject lands in issue
are reserved lands for public use. They are properties of public
dominion. The ownership of such lands remains with the State unless they
are withdrawn by law or presidential proclamation from public use.
Under Section 2, Article XII of the 1987
Constitution, the foreshore and submerged areas of Manila Bay are part
of the "lands of the public domain, waters x x x and other natural
resources" and consequently "owned by the State." As such, foreshore and
submerged areas "shall not be alienated," unless they are classified as
"agricultural lands" of the public domain. The mere reclamation of
these areas by PEA does not convert these inalienable natural resources
of the State into alienable or disposable lands of the public domain.
There must be a law or presidential proclamation officially classifying
these reclaimed lands as alienable or disposable and open to disposition
or concession. Moreover, these reclaimed lands cannot be classified as
alienable or disposable if the law has reserved them for some public or
quasi-public use.
As the Court has repeatedly ruled, properties of public dominion are not subject to execution or foreclosure sale.14
Thus, the assessment, levy and foreclosure made on the subject
reclaimed lands by respondent, as well as the issuances of certificates
of title in favor of respondent, are without basis.
WHEREFORE, the petition is GRANTED. The January 8,
2010 Order of the Regional Trial Court, Branch 195, Parañaque City, is
REVERSED and SET ASIDE. All reclaimed properties owned by the Philippine
Reclamation Authority are hereby declared EXEMPT from real estate
taxes. All real estate tax assessments, including the final notices of
real estate tax delinquencies, issued by the City of Parañaque on the
subject reclaimed properties; the assailed auction sale, dated April 7,
2003; and the Certificates of Sale subsequently issued by the Parañaque
City Treasurer in favor of the City of Parañaque, are all declared VOID.
SO ORDERED.JOSE CATRLA MENDOZA
Associate justice
WE CONCUR:
DIOSDADO M. PERALTA
Associate justice
Acting Chairperson
Associate justice
Acting Chairperson
| MARIANO C. DEL CASTILLO* Associate Justice |
ROBERTO A. ABAD Associate Justice |
ESTELA M. PERLAS-BERNABE
Associate justice
Associate justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.
DIOSDADO M. PERALTAAssociate justice
Acting Chairperson, Third Division
C E R T I F I C A T I O N
I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.
ANTONIO T. CARPIOSenior Associate Justice
(Per Section 12, R.A. No. 926, The Judiciary Act of 1948, as amended)
Footnotes
1 Rollo, pp. 50-55.
2 Manila International Airport Authority v. Court of Appeals, G.R. No. 155650, July 20, 2006, 495 SCRA 618-619.
3 Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 169836, July 31, 2007, 528 SCRA 706, 712.
4
Section 7. Capital Stock. The Authority shall have an authorized
capital stock divided into THREE MILLION (3,000,000) no par value shares
to be subscribed and paid for as follows:
P5,000,000.00) PESOS in cash;(b) The remaining ONE MILLION (1,000,000) shares of stock may be subscribed and paid for by the Republic of the Philippines or by government financial institutions at values to be determined by the Board and approved by the President of the Philippines.The fair value of the interests hereby transferred shall, for all intents and purposes, be considered as paid-up capital pertaining to the government of the Republic of the Philippines in the Authority.The voting power pertaining to the shares of stock subscribed by the government of the Republic of the Philippines shall be vested in the President of the Philippines or in such person or persons as he may designate.
5
Entitled "Designating the Public Estates Authority as the Agency
primarily responsible for all Reclamation Projects" dated February 14,
1979.
6 Entitled "Further Defining Certain Functions and Powers of the Public Estates Authority" dated February 26, 1981.
7
Entitled "Transferring the Philippine Reclamation Authority from the
Department of Public Works and Highways to the Department of Environment
and Natural Resources" dated May 14, 2009.
8 Manila International Airport Authority v. Court of Appeals, supra note 2.9 Id.
10 Local Government Code, Section 234(a).
11 Supra note 2.
12 433 Phil. 506, 589 (2002).
13 Id. at 584-585.
14 Manila International Airport Authority v. Court of Appeals, supra note 2.
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