MANILA ELECTRIC COMPANY

vs. THE CITY ASSESSOR and CITY TREASURER OF LUCENA CITY

G.R. No. 166102, August 5, 2015

The transformers, electric posts,

transmission lines, insulators, and
electric meters of MERALCO may
qualify as "machinery" under the
Local Government Code subject to
real property tax.
Through the years, the relevant laws have consistently considered
"machinery" as real property subject to real property tax. It is the
definition of "machinery" that has been changing and expanding, as the
following table will show:
Real Property Incidence of Real Property Tax Definition of Machinery 47  
Tax Law    
     
The Assessment Law Section 2.  Incidence of real property Section 3. Property exempt
Commonwealth tax. — Except in chartered cities, from tax. — The exemptions
Act No. 470) there shall be levied, assessed, and shall be as follows:
  collected, an annual ad valorem tax  
Effectivity: on real property, including land,  xxx
January 1, 1940 buildings, machinery, and other   
  improvements not hereinafter (f) Machinery, which term
  specifically exempted.  shall embrace machines,
    mechanical contrivances,
    instruments, appliances, and
    apparatus attached to the real
    estate, used for industrial
    agricultural or manufacturing
    purposes, during the first five
    years of the operation of the
    machinery.
     
Real Property Section 38. Incidence of Real Section 3. Definition of Terms.
Tax Code Property Tax. — There shall be — When used in this Code —
  levied, assessed and collected in  
Effectivity: all provinces, cities and municipalities  xxx
June 1, 1974 an annual ad valorem tax on real   
  property, such as land, buildings, (m) Machinery — shall embrace
  machinery and other improvements machines, mechanical 
  affixed or attached to real property contrivances, instruments,
  not hereinafter specifically exempted. appliances and apparatus attached
   
   
   
   
   
   
   
   
   
Real Property Section 38. Incidence of Real
Tax Code, Property Tax. — There shall be
as amended by levied, assessed and collected in
Presidential Decree all provinces, cities and
No. 1383 municipalities an annual  ad
  valorem tax on real property, such
Effectivity: as land, buildings, machinery and
May 25, 1978 other improvements affixed or
  attached to real property not
  hereinafter specifically exempted.
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
Local Government Section 232. Power to Levy Real
Code Property Tax. — A province or city
  or a municipality within the
Effectivity: Metropolitan Manila Area may
January 1, 1992 levy an annual ad valorem tax on
  real property such as land, building,
  machinery, and other improvement
to the real estate. It includes the
physical facilities available for
production, as well as the
installations and appurtenant
service facilities, together with
all other equipment designed
for or essential to its
manufacturing, industrial or
agricultural purposes.
Section 3. Definition of Terms.
— When used in this Code —
 
xxx
 
(m) Machinery — shall embrace
machines, equipment, 
mechanical contrivances,
instruments, appliances and
apparatus attached to the real
estate. It shall include the
physical facilities available for
production, as well as the
installations and appurtenant
service facilities, together with
all those not permanently
attached to the real estate but
are actually, directly and
essentially used to meet the
needs of the particular
industry, business, or works,
which by their very nature and
purpose are designed for, or
essential to manufacturing,
commercial, mining, industrial
or agricultural purposes.
Section 199. Definitions. —
When used in this Title:
 
xxx
 
(o) "Machinery" embraces 
machines, equipment,
  not hereinafter specifically exempted. mechanical contrivances,
    instruments, appliances or
    apparatus which may or may not
    be attached, permanently or
    temporarily, to the real
    property. It includes the physical
    facilities for production, the
    installations and appurtenant
    service facilities, those which are
    mobile, self-powered or self-
    propelled, and those not
    permanently attached to the real
    property which are actually,
    directly, and exclusively used to
    meet the needs of the particular
    industry, business or activity and
    which by their very nature and
    purpose are designed for, or
    necessary to its manufacturing,
    mining, logging, commercial,
    industrial or agricultural
    purposes[.]

 
MERALCO is a public utility engaged in electric distribution, and its
transformers, electric posts, transmission lines, insulators, and electric
meters constitute the physical facilities through which MERALCO delivers
electricity to its consumers. Each may be considered as one or more of
the following:
A "machine," "equipment," "contrivance," "instrument," "appliance,"
"apparatus," or "installation."
The Court highlights that under Section 199 (o) of the Local
Government Code, machinery, to be deemed real property subject to real
property tax, need no longer be annexed to the land or building as these
"may or may not be attached, permanently or temporarily to the real
property," and in fact, such machinery may even be "mobile." The same
provision though requires that to be machinery subject to real property
tax, the physical facilities for production, installations, and appurtenant
service facilities, those which are mobile, self-powered or self-propelled,
or not permanently attached to the real property (a) must be actually,
directly, and exclusively used to meet the needs of the particular industry,
business, or activity; and (2) by their very nature and purpose, are
designed for, or necessary for manufacturing, mining, logging,
commercial, industrial, or agricultural purposes. Thus, Article 290 (o) of
the Rules and Regulations Implementing the Local Government Code of
1991 recognizes the following exemption:
Machinery which are of general purpose use which are not
directly and exclusively used to meet the needs of a particular
industry, business or activity shall not be considered within the
definition of machinery under this Rule.
While the Local Government Code still does not provide for a
specific definition of "real property," Sections 199 (o) and 232 of the
said Code, respectively, gives an extensive definition of what constitutes
"machinery" and unequivocally subjects such machinery to real property
tax. The Court reiterates that the machinery subject to real property tax
under the Local Government Code "may or may not be attached,
permanently or temporarily to the real property;" and the physical
facilities for production, installations, and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, or are not
permanently attached must (a) be actually, directly, and exclusively used
to meet the needs of the particular industry, business, or activity; and (2)
by their very nature and purpose, be designed for, or necessary for
manufacturing, mining, logging, commercial, industrial, or agricultural
purposes. 
The Local Government Code considers as real property machinery which
"may or may not be attached, permanently or temporarily to the real
property," and even those which are "mobile."
Therefore, for determining whether machinery is real property
subject to real property tax, the definition and requirements under
the Local Government Code are controlling.
MERALCO maintains that its electric posts are not machinery subject
to real property tax because said posts are not being exclusively used by
MERALCO; these are also being utilized by cable and telephone
companies. This, however, is a factual issue which the Court cannot take
cognizance of in the Petition at bar as it is not a trier of facts. Whether or
not the electric posts of MERALCO are actually being used by other
companies or industries is best left to the determination of the City
Assessor or his deputy, who has been granted the authority to take
evidence under Article 304 of the Rules and Regulations Implementing the
Local Government Code of 1991. 
 PROVINCIAL ASSESSOR OF AGUSAN DEL SUR
vs. FILIPINAS PALM OIL PLANTATION, INC.,
G.R. No. 183416. October 5, 2016

I
Under Section 133 (n) of the Local Government Code, the taxing
power of local government units shall not extend to the levy of taxes, fees,
or charges on duly registered cooperatives under the Cooperative
Code. 61 Section 234 (d) of the Local Government Code specifically
provides for real property tax exemption to cooperatives:
SECTION 234.Exemptions from Real Property Tax. — The following
are exempted from payment of the real property tax:
xxx xxx xxx
(d) All real property owned by duly registered cooperatives as
provided for under [Republic Act] No.  6938[.]
NGPI-NGEI, as the owner of the land being leased by respondent,
falls within the purview of the law. Section 234 of the Local Government
Code exempts all real property owned by cooperatives without
distinction. Nothing in the law suggests that the real property tax
exemption only applies when the property is used by the cooperative
itself. Similarly, the instance that the real property is leased to either an
individual or corporation is not a ground for withdrawal of tax exemption.
In arguing the first issue, petitioner hinges its claim on a misplaced
reliance in  Mactan, which refers to the revocation of tax exemption due to
the effectivity of the Local Government Code. However,  Mactan does not
refer to the tax exemption extended to cooperatives. The portion that
petitioner cited specifically mentions that the exemption granted to
cooperatives has not been withdrawn by the effectivity of the Local
Government Code: 
[S]ection 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the
L[ocal] G[overnment] C[ode],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 L[ocal]
G[overnment] C[ode] prescribes the general rule,  viz.,they
 are  withdrawn upon the effectivity of the L[ocal] G[overnment]
C[ode],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 L[ocal] G[overnment] C[ode]. 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 L[ocal]
G[overnment] C[ode].  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 L[ocal] G[overnment]
C[ode],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.
It must show that the parcels of land in question, which are
real property, are any one of those enumerated in Section 234,
either by virtue of ownership, character, or use of the
property. 63 (Emphasis supplied)
The roads that respondent constructed within the leased area
should not be assessed with real property taxes.  Bislig Bay  finds
application here. Bislig Bay Lumber Company, Inc. (Bislig Bay) was a
timber concessionaire of a portion of public forest in the provinces of
Agusan and Surigao. 64 To aid in developing its concession, Bislig Bay built
a road at its expense from a barrio leading towards its area. 65 The
Provincial Assessor of Surigao assessed Bislig Bay with real property tax
on the constructed road, which was paid by the company under
protest. 66 It claimed that even if the road was constructed on public land,
it should be subjected to real property tax because it was built by the
company for its own benefit. 67 On the other hand, Bislig Bay asserted that
the road should be exempted from real property tax because it belonged
to national government by right of accession. 68 Moreover, the road
constructed already became an inseparable part of the land. 69 The
records also showed that the road was not only built for the benefit of
Bislig Bay, but also of the public. 70 This Court ruled for Bislig Bay, thus: 
We are inclined to uphold the theory of appellee. In the first
place, it cannot be disputed that the ownership of the road that
was constructed by appellee belongs to the government by right
accession not only because it is inherently incorporated or attached
to the timber land leased to appellee but also because upon the
expiration of the concession, said road would ultimately pass to the
national government. ...In the second place, while the road was
constructed by appellee primarily for its use and benefit, the
privilege is not exclusive, for, under the lease contract entered into
by the appellee and the government and by public in by the
general. Thus, under said lease contract, appellee cannot prevent
the use of portions, of the concession for homesteading
purposes. ...It is also in duty bound to allow the free use of forest
products within the concession for the personal use of individuals
residing in or within the vicinity of the land. ...In other words, the
government has practically reserved the rights to use the road to
promote its varied activities. Since, as above shown, the road in
question cannot be considered as an improvement which belongs
to appellee, although in part is for its benefit, it is clear that the
same cannot be the subject of assessment within the meaning of
section 2 of Commonwealth Act No. 470. 71
This was reiterated in  Board of Assessment Appeals of Zamboanga del
Sur v. Samar Mining Company, Inc.  72 Samar Mining Company, Inc. (Samar
Mining) was a domestic corporation engaged in the mining
industry. 73 Since Samar Mining's mining site and mill were in an inland
location entailing long distance from its area to the loading point, Samar
Mining was constrained to construct a road for its convenience. 74 Initially,
Samar Mining filed miscellaneous lease applications for a road right of
way covering lands under the jurisdiction of the Bureau of Lands and the
Bureau of Forestry where the proposed road would pass
through. 75 Samar Mining was given a "temporary permit to occupy and
use the lands applied for by it"; 76 hence, it was able to build what was
eventually known as the Samico Road. Samar Mining was assessed by the
Provincial Assessor of Zamboanga del Sur with real property taxes on the
road, which prompted it to appeal before the Board of Assessment
Appeals. 77 Invoking  Bislig Bay,Samar Mining claimed that it should not be
assessed with real property tax since the road was constructed on public
land. 78 This Court ruled for Samar Mining, thus:  aICcHA

There is no question that the road constructed by

respondent Samar on the public lands leased to it by the
government is an improvement. But as to whether the same is
taxable under the aforequoted provision of the Assessment Law,
this question has already been answered in the negative by this
Court. In the case of Bislig Bay Lumber Co.,Inc. vs. Provincial
Government of Surigao,where a similar issue was raised. ...
 xxx xxx xxx
...What is emphasized in the Bislig case is that the improvement
is exempt from taxation because it is an integral part of the public land
on which it is constructed and the improvement is the property of the
government by right of accession. Under Section 3(a) of the Assessment
Law, all properties owned by the government, without any distinction,
are exempt from taxation.79 (Emphasis supplied, citations omitted)
The roads that respondent constructed became permanent
improvements on the land owned by the NGPI-NGEI by right of accession
under the Civil Code, thus:
Article 440.The ownership of property gives the right by accession
to everything which is produced thereby, or which is  incorporated
or attached thereto, either naturally or artificially.
xxx xxx xxx
Article 445.Whatever is built, planted or sown on the land of
another and the  improvements or repairs made thereon,  belong to
the owner of the land[.]
Despite the land being leased by respondent when the roads were
constructed, the ownership of the improvement still belongs to NGPI-
NGEI. As provided under Article 440 and 445 of the Civil Code, the land is
owned by the cooperatives at the time respondent built the roads. Hence,
whatever is incorporated in the land, either naturally or artificially,
belongs to the NGPI-NGEI as the landowner.
Although the roads were primarily built for respondent's benefit,
the roads were also being used by the members of NGPI and the
public. 80Furthermore, the roads inured to the benefit of NGPI-NGEI as
owners of the land not only by right of accession but through the express
provision in the lease agreement:
On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc.,as
Lessor, and NDC-Guthrie Plantations, Inc.,as Lessee, entered into a
"Lease Agreement" ...covering the agricultural lands transferred by
NDC to the DAR, which lands the DAR ultimately distributed
undivided to qualified workers-beneficiaries. ...
xxx xxx xxx
Clause No. 6.3 of the same lease agreement provides that
"All taxes due on the improvements on the Leased Property except
those improvements on the Area that the LESSOR shall have
utilized under Clause 1.2 hereof, shall be for the account of the
LESSEE."
Clause No. 9.4 of the same lease agreement provides that
"...  All fixed and permanent improvements, such as roads and palm
trees introduced on the Leased Property, shall automatically accrue to
the LESSOR upon termination of this Lease Agreement without need of
reimbursement."
All the above-cited stipulations in the lease agreement
between NGPI Multi-Purpose Cooperative and NDC-Guthrie
Plantations, Inc.  were reconfirmed and reaffirmed in the Addendum to
 Lease Agreement entered into by and between NGPI Multi-Purpose
Cooperative and Filipinas Palmoil Plantations, Inc. on January 30,
1998....The main subject of the said Addendum was the extension
of the term of the lease agreement up to December 31, 2032, along
with economic benefits to the lessor other than rentals.  EHaASD

There is no dispute that the roads are on the land owned by

NGPI Multi-Purpose Cooperative which leased the same to Petitioner-
Appellee. These roads belong to the Multi-Purpose Cooperative, not
only by right of accession but also by express provisions of the Contract
of Lease[.] 81 (Emphasis supplied)
Respondent claims that under its lease agreement with NGPI-NGEI,
it pays an Annual Fixed Rental, which includes the payment of taxes. 82 If
NGPI-NGEI were liable to the local government for real property tax on the
land, the tax should be taken from the Annual Fixed Rental:
"2.1. In consideration of this Lease Agreement, the LESSEE shall pay
the LESSOR the following annual rentals:
"1) An annual fixed rental, in the following amount — "SIX
HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE
PER ANNUM  which would cover the following:
 "(1)  All Taxes on the Land 
 "(2) Administration Charges
 "(3) Amortization charges
 "It is understood that, if the annual fixed rental of "SIX
HUNDRED THIRTY FIVE PESOS" (P635.00) is insufficient
to pay any increase on the land taxes, the Lessee shall
pay the difference, provided such increase does not
exceed ten percent (10%) of the immediately preceding
tax imposed on the land; provided further, that any
increase beyond these percentage shall be borne
equally by the LESSOR and LESSEE.  IDTSEH

 "The foregoing notwithstanding, it is understood and agreed

that at all times,  liability for realty taxes on the Leased
Property Primarily and principally lies with the LESSOR and
any reference herein to payment by LESSEE of said taxes is
only for purposes of earmarking the proceeds of the
rentals herein agreed upon."
Clause No. 6.3 of the same lease agreement provides that
"All taxes due on the improvements on the Leased Property except
those improvements on the Area that the LESSOR shall have
utilized under Clause 1.2 hereof, shall be for the account of the
LESSEE." 83 (Emphasis supplied)
Therefore, NGPI-NGEI, as owner of the roads that permanently
became part of the land being leased by respondent, shall be liable for
real property taxes, if any. However, by express provision of the Local
Government Code, NGPI-NGEI is exempted from payment of real property
tax. 84
 II
The road equipment and mini haulers shall be considered as real
property, subject to real property tax.
Section 199 (o) of the Local Government Code defines "machinery"
as real property subject to real property tax, 85 thus:
SECTION 199.Definition of Terms. — When used in this Title, the
term:
xxx xxx xxx
(o) "Machinery" embraces machines, equipment, mechanical
contrivances, instruments, appliances or apparatus
which may or may not be attached, permanently or
temporarily, to the real property. It includes the physical
facilities for production, the installations and
appurtenant service facilities, those which are mobile,
self-powered or self-propelled, and those not
permanently attached to the real property which are
actually, directly, and exclusively used to meet the
needs of the particular industry, business or activity and
which by their very nature and purpose are designed
for, or necessary to its manufacturing, mining, logging,
commercial, industrial or agricultural purposes[.] 
Article 415 (5) of the New Civil Code defines "machinery" as that
which constitutes an immovable property:
Article 415. The following are  immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or
implements  intended by the owner of the tenement for an
industry or works which may be carried on in a building or
on a piece of land, and which tend directly to meet the
needs of the said industry or works[.] (Emphasis supplied)
Petitioner contends that the second sentence of Section 199 (o)
includes the road equipment and mini haulers since these are directly and
exclusively used by respondent to meet the needs of its operations. 86 It
further claims that Article 415 (5) of the New Civil Code should not control
the Local Government Code, a subsequent legislation. 87
On the other hand, respondent claims that the road equipment and
mini haulers are movables by nature. It asserts that although there may
be a difference between the meaning of "machinery" under the Local
Government Code and that of immovable property under Article 415 (5) of
the Civil Code, "the controlling interpretation of Section 199 (o) of
[the Local Government Code] is the interpretation of Article 415 (5) of
the Civil Code." 88
In  Manila Electric Company v. City Assessor,89 a similar issue of which
definition of "machinery" prevails to warrant the assessment of real
property tax on it was raised.
 Manila Electric Company (MERALCO) insisted on harmonizing the
provisions of the Civil Code and the Local Government Code and asserted
that "machinery" contemplated under Section 199 (o) of the Local
Government must still be within the contemplation of immovable
property under Article 415 of the Civil Code.90 However, this Court ruled
that harmonizing such laws "would necessarily mean imposing additional
requirements for classifying machinery as real property for real property
tax purposes not provided for, or even in direct conflict with, the
provisions of the Local Government Code." 91 Thus: 
While the Local Government Code still does not provide for a
specific definition of "real property," Sections 199(o) and 232 of the
said Code, respectively, gives an extensive definition of what
constitutes "machinery" and unequivocally subjects such
machinery to real property tax. The Court reiterates that the
machinery subject to real property tax under the Local Government
Code "may or may not be attached, permanently or temporarily to
the real property"; and the physical facilities for production,
installations, and appurtenant service facilities, those which are
mobile, self-powered or self-propelled, or are not permanently
attached must (a) be actually, directly, and exclusively used to meet
the needs of the particular industry, business, or activity; and (b) by
their very nature and purpose, be designed for, or necessary for
manufacturing, mining, logging, commercial, industrial, or
agricultural purposes.
xxx xxx xxx
Article 415, paragraph (5) of the Civil Code considers as
immovables or real properties "[m]achinery, receptacles,
instruments or implements intended by the owner of the tenement
for an industry or works which may be carried on in a building or
on a piece of land, and which tend directly to meet the needs of the
said industry or works." The Civil Code, however, does not define
"machinery."
The properties under Article 415, paragraph (5) of the Civil
Code are immovables by destination, or "those which are
essentially movables, but by the purpose for which they have been
placed in an immovable, partake of the nature of the latter because
of the added utility derived therefrom." These properties,
including  machinery, become immobilized if the following requisites
concur: (a) they are placed in the tenement by the owner of such
tenement; (b) they are destined for use in the industry or work in the
tenement; and (c) they tend to directly meet the needs of said industry
or works. The first two requisites are not found anywhere in
the Local Government Code. 92 (Emphasis supplied, citations
omitted)
Section 199 (o) of the Local Government prevails over Article 415 (5)
of the Civil Code.In  Manila Electric Company:  TAacHE

As between the  Civil Code, a general law governing property and

property relations, and the  Local Government Code, a special law
granting local government units the power to impose real property tax,
 then the latter shall prevail. As the Court pronounced
in  Disomangcop v. The Secretary of the Department of Public Works
and Highways Simeon A. Datumanong:
It is a finely-imbedded principle in statutory
construction that a special provision or law prevails
over a general one.  Lex specialis derogant generali.As
this Court expressed in the case of  Leveriza v.
Intermediate Appellate Court,"another basic principle of
statutory construction mandates that  general
legislation must give way to special legislation on the
same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are
not applicable, that specific statute prevails over a
general statute and that where two statutes are of equal
theoretical application to a particular case, the one
designed therefor specially should prevail."
The circumstance that the special law is passed
before or after the general act does not change the
principle. Where the special law is later, it will be
regarded as an exception to, or a qualification of, the
prior general act; and where the general act is later,
the special statute will be construed as remaining an
exception to its terms, unless repealed expressly or by
necessary implication. 
Furthermore, in  Caltex (Philippines),Inc. v. Central Board of
Assessment Appeals,the Court acknowledged that "[i]t is a familiar
phenomenon to see things classed as real property for purposes of
taxation which on general principle might be considered personal
property[.]"
Therefore, for determining whether machinery is real property
subject to real property tax, the definition and requirements under
the  Local Government Code  are controlling.93 (Emphasis supplied,
citations omitted)
Respondent is engaged in palm oil plantation. 94 Thus, it harvests
fruits from palm trees for oil conversion through its milling plant. 95 By the
nature of respondent's business, transportation is indispensable for its
operations.
Under the definition provided in Section 199 (o) of the Local
Government Code, the road equipment and the mini haulers are classified
as machinery, thus:
SECTION 199.Definition of Terms. — When used in this Title, the
term:
xxx xxx xxx
(o) "Machinery" ...includes the  physical facilities for
production,the installations and appurtenant service
facilities,  those which are mobile,self-powered or self-
propelled, and those not permanently attached to the
real property  which are actually, directly, and
 exclusively used to meet the needs of the particular
industry, business or activity and which by their very
nature and purpose are designed for, or necessary to its
manufacturing, mining, logging, commercial, industrial
or agricultural purposes[.] (Emphasis supplied)
Petitioner is correct in claiming that the phrase pertaining to
physical facilities for production is comprehensive enough to include the
road equipment and mini haulers as actually, directly, and exclusively
used by respondent to meet the needs of its operations in palm oil
production. 96 Moreover, "mini-haulers are farm tractors pulling attached
trailers used in the hauling of seedlings during planting season and in
transferring fresh palm fruits from the farm [or] field to the processing
plant within the plantation area." he indispensability of the road
equipment and mini haulers in transportation makes it actually, directly,
and exclusively used in the operation of respondent's business.  HDICSa

In its Comment, respondent claims that the equipment is no longer

vital to its operation because it is currently employing equipment outside
the company to do the task. However, respondent never raised this
contention before the lower courts. Hence, this is a factual issue of which
this Court cannot take cognizance. This Court is not a trier of facts. Only
questions of law are entertained in a petition for review assailing a Court
of Appeals decision. 
 CAPITOL WIRELESS, INC.,
vs. THE PROVINCIAL TREASURER OF BATANGAS, THE PROVINCIAL ASSESSOR OF BATANGAS,
THE MUNICIPAL TREASURER AND ASSESSOR OF NASUGBU, BATANGAS,
G.R. No. 180110. May 30, 2016
ISSUE:
May submarine communications cables be classified as taxable real
property by the local governments?

RULING:
The petition is denied. No error attended the ruling of the appellate
court that the case involves factual questions that should have been
resolved before the appropriate administrative bodies.
In disputes involving real property taxation, the general rule is to
require the taxpayer to first avail of administrative remedies and pay the
tax under protest before allowing any resort to a judicial action, except
when the assessment itself is alleged to be illegal or is made without legal
authority. For example, prior resort to administrative action is required
when among the issues raised is an allegedly erroneous assessment, like
when the reasonableness of the amount is challenged, while direct court
action is permitted when only the legality, power, validity or authority of
the assessment itself is in question. Stated differently, the general rule of
a prerequisite recourse to administrative remedies applies when
questions of fact are raised, but the exception of direct court action is
allowed when purely questions of law are involved.
This Court has previously and rather succinctly discussed the
difference between a question of fact and a question of law.
In  Cosmos Bottling Corporation v. Nagrama, Jr., 33 it held:
The Court has made numerous dichotomies between
questions of law and fact. A reading of these dichotomies shows
that labels attached to law and fact are descriptive rather than
definitive. We are not alone in Our difficult task of clearly
distinguishing questions of fact from questions of law. The United
States Supreme Court has ruled that: "we [do not] yet know of any
other rule or principle that will unerringly distinguish a factual
finding from a legal conclusion."
In  Ramos v. Pepsi-Cola Bottling Co. of the P.I., the Court ruled:
There is a question of law in a given case when
the doubt or difference arises as to what the law is on
a certain state of facts; there is a question of fact when
the doubt or difference arises as to the truth or the
falsehood of alleged facts.  DETACa

We shall label this the doubt dichotomy.

In  Republic v. Sandiganbayan, the Court ruled:
. . . A question of law exists when the doubt or
controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the
 issue does not call for an examination of the probative
value of the evidence presented, the truth or
falsehood of facts being admitted. In contrast, a
question of fact exists when the doubt or difference
arises as to the truth or falsehood of facts or when the
query invites calibration of the whole evidence
considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding
circumstances as well as their relation to each other
and to the whole, and the probability of the situation.
For the sake of brevity, We shall label this the law application
and calibration dichotomy.
In contrast, the dynamic legal scholarship in the United
States has birthed many commentaries on the question of law and
question of fact dichotomy. As early as 1944, the law was described
as growing downward toward "roots of fact" which grew upward to
meet it. In 1950, the late Professor Louis Jaffe saw fact and law as a
spectrum, with one shade blending imperceptibly into the other.
Others have defined questions of law as those that deal with the
general body of legal principles; questions of fact deal with "all
other phenomena . . . ." Kenneth Culp Davis also weighed in and
noted that the difference between fact and law has been
characterized as that between "ought" questions and "is"
questions.
Guided by the quoted pronouncement, the Court sustains the CA's finding
that petitioner's case is one replete with questions of fact instead of pure
questions of law, which renders its filing in a judicial forum improper
because it is instead cognizable by local administrative bodies like the
Board of Assessment Appeals, which are the proper venues for trying
these factual issues. Verily, what is alleged by Capwire in its petition as
"the crux of the controversy," that is, "whether or not an indefeasible right
over a submarine cable system that lies in international waters can be
subject to real property tax in the Philippines," 35 is not the genuine issue
that the case presents — as it is already obvious and fundamental that
real property that lies outside of Philippine territorial jurisdiction cannot
be subjected to its domestic and sovereign power of real property
taxation — but, rather, such factual issues as the extent and status of
Capwire's ownership of the system, the actual length of the cable/s that lie
in Philippine territory, and the corresponding assessment and taxes due
on the same, because the public respondents imposed and collected the
assailed real property tax on the finding that at least a portion or some
portions of the submarine cable system that Capwire owns or co-owns
lies inside Philippine territory. Capwire's disagreement with such findings
of the administrative bodies presents little to no legal question that only
the courts may directly resolve.  HEITAD

Instead, Capwire argues and makes claims on mere assumptions of

certain facts as if they have been already admitted or established, when
they have not, since no evidence of such have yet been presented in the
proper agencies and even in the current petition. As such, it remains
 unsettled whether Capwire is a mere co-owner, not full owner, of the
subject submarine cable and, if the former, as to what extent; whether all
or certain portions of the cable are indeed submerged in water; and
whether the waters wherein the cable/s is/are laid are entirely outside of
Philippine territorial or inland waters,  i.e., in international waters. More
simply, Capwire argues based on mere legal conclusions, culminating on
its claim of illegality of respondents' acts, but the conclusions are yet
unsupported by facts that should have been threshed out quasi-judicially
before the administrative agencies. It has been held that "a bare
characterization in a petition of unlawfulness, is merely a legal conclusion
and a wish of the pleader, and such a legal conclusion unsubstantiated by
facts which could give it life, has no standing in any court where issues
must be presented and determined by facts in ordinary and concise
language." 36 Therefore, Capwire's resort to judicial action, premised on its
legal conclusion that its cables (the equipment being taxed) lie entirely on
international waters, without first administratively substantiating such a
factual premise, is improper and was rightly denied. Its proposition that
the cables lie entirely beyond Philippine territory, and therefore, outside
of Philippine sovereignty, is a fact that is not subject to judicial notice
since, on the contrary, and as will be explained later, it is in fact certain
that portions of the cable would definitely lie within Philippine waters.
Jurisprudence on the Local Government Code is clear that facts such as
these must be threshed out administratively, as the courts in these types
of cases step in at the first instance only when pure questions of law are
involved.
RULING:
Nonetheless, We proceed to decide on whether submarine wires or
cables used for communications may be taxed like other real estate.
We hold in the affirmative. 
Submarine or undersea communications cables are akin to electric
transmission lines which this Court has recently declared in  Manila Electric
Company v. City Assessor and City Treasurer of Lucena City, 37 as "no longer
exempted from real property tax" and may qualify as "machinery" subject
to real property tax under the Local Government Code. To the extent that
the equipment's location is determinable to be within the taxing
authority's jurisdiction, the Court sees no reason to distinguish between
submarine cables used for communications and aerial or underground
wires or lines used for electric transmission, so that both pieces of
property do not merit a different treatment in the aspect of real property
taxation. Both electric lines and communications cables, in the strictest
sense, are not directly adhered to the soil but pass through posts, relays
or landing stations, but both may be classified under the term
"machinery" as real property under Article 415 (5) 38 of the Civil Code for
the simple reason that such pieces of equipment serve the owner's
business or tend to meet the needs of his industry or works that are on
real estate. Even objects in or on a body of water may be classified as
such, as "waters" is classified as an immovable under Article 415 (8) 39 of
the Code. A classic example is a boathouse which, by its nature, is a vessel
and, therefore, a personal property but, if it is tied to the shore and used
as a residence, and since it floats on waters which is immovable, is
considered real property. 40Besides, the Court has already held that "it is a
familiar phenomenon to see things classed as real property for purposes
of taxation which on general principle might be considered personal
property." 41
Thus, absent any showing from Capwire of any express grant of an
exemption for its lines and cables from real property taxation, then this
interpretation applies and Capwire's submarine cable may be held subject
to real property tax.
Having determined that Capwire is liable, and public respondents
have the right to impose a real property tax on its submarine cable, the
issue that is unresolved is how much of such cable is taxable based on the
extent of Capwire's ownership or co-ownership of it and the length that is
laid within respondents' taxing jurisdiction. The matter, however, requires
a factual determination that is best performed by the Local and Central
Boards of Assessment Appeals, a remedy which the petitioner did not
avail of.
At any rate, given the importance of the issue, it is proper to lay
down the other legal bases for the local taxing authorities' power to tax
portions of the submarine cables of petitioner. It is not in dispute that the
submarine cable system's Landing Station in Nasugbu, Batangas is owned
by PLDT and not by Capwire. Obviously, Capwire is not liable for the real
property tax on this Landing Station. Nonetheless, Capwire admits that it
co-owns the submarine cable system that is subject of the tax assessed
and being collected by public respondents. As the Court takes judicial
notice that Nasugbu is a coastal town and the surrounding sea falls within
what the United Nations Convention on the Law of the
Sea (UNCLOS) would define as the country's territorial sea (to the extent of
12 nautical miles outward from the nearest baseline, under Part II,
Sections 1 and 2) over which the country has sovereignty, including the
seabed and subsoil, it follows that indeed a portion of the submarine
cable system lies within Philippine territory and thus falls within the
jurisdiction of the said local taxing authorities. 42 It easily belies Capwire's
contention that the cable system is entirely in international waters. And
even if such portion does not lie in the 12-nautical-mile vicinity of the
territorial sea but further inward, in  Prof. Magallona v. Hon. Ermita, et
al. 43 this Court held that "whether referred to as Philippine 'internal
waters' under Article I of the Constitution 44 or as 'archipelagic waters'
under UNCLOS Part III, Article 49 (1, 2, 4), 45 the Philippines exercises
sovereignty over the body of water lying landward of (its) baselines,
including the air space over it and the submarine areas underneath."
Further, under Part VI, Article 79 46 of the UNCLOS, the Philippines clearly
has jurisdiction with respect to cables laid in its territory that are utilized
in support of other installations and structures under its jurisdiction.  ATICcS
 And as far as local government units are concerned, the areas
described above are to be considered subsumed under the term
"municipal waters" which, under the Local Government Code, includes
"not only streams, lakes, and tidal waters within the municipality, not
being the subject of private ownership and not comprised within the
national parks, public forest, timber lands, forest reserves or fishery
reserves, but also marine waters included between two lines drawn
perpendicularly to the general coastline from points where the boundary
lines of the municipality or city touch the sea at low tide and a third line
parallel with the general coastline and fifteen (15) kilometers from
it." 47 Although the term "municipal waters" appears in the Code in the
context of the grant of quarrying and fisheries privileges for a fee by local
governments, 48 its inclusion in the Code's Book II which covers local
taxation means that it may also apply as guide in determining the
territorial extent of the local authorities' power to levy real property
taxation.
Thus, the jurisdiction or authority over such part of the subject
submarine cable system lying within Philippine jurisdiction includes the
authority to tax the same, for taxation is one of the three basic and
necessary attributes of sovereignty, 49 and such authority has been
delegated by the national legislature to the local governments with
respect to real property taxation. 50
As earlier stated, a way for Capwire to claim that its cable system is
not covered by such authority is by showing a domestic enactment or
even contract, or an international agreement or treaty exempting the
same from real property taxation. It failed to do so, however, despite the
fact that the burden of proving exemption from local taxation is upon
whom the subject real property is declared. 51 Under the Local
Government Code, every person by or for whom real property is declared,
who shall claim tax exemption for such property from real property
taxation "shall file with the provincial, city or municipal assessor within
thirty (30) days from the date of the declaration of real property sufficient
documentary evidence in support of such claim." 52 Capwire omitted to do
so. And even under Capwire's legislative franchise, RA 4387, which
amended RA 2037, where it may be derived that there was a grant of real
property tax exemption for properties that are part of its franchise, or
directly meet the needs of its business, 53 such had been expressly
withdrawn by the Local Government Code, which took effect on January 1,
1992, Sections 193 and 234 of which provide: 54
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 nonprofit
hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code. 
xxx xxx xxx
 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 of 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. 55
Such express withdrawal had been previously held effective upon
exemptions bestowed by legislative franchises granted prior to the
effectivity of the Local Government Code. Capwire fails to allege or
provide any other privilege or exemption that were granted to it by the
legislature after the enactment of the Local Government Code. Therefore,
the presumption stays that it enjoys no such privilege or exemption. Tax
exemptions are strictly construed against the taxpayer because taxes are
considered the lifeblood of the nation.
 MANILA INTERNATIONAL AIRPORT AUTHORITY
vs. COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF
PARAÑAQUE
G.R. No. 155650. July 20, 2006

ISSUE:
This petition raises the threshold issue of whether the Airport Lands
and Buildings of MIAA are exempt from real estate tax under existing laws. If
so exempt, then the real estate tax assessments issued by the City of
Parañaque, and all proceedings taken pursuant to such assessments, are
void. In such event, the other issues raised in this petition become moot.
RULING:
We rule that MIAA's Airport Lands and Buildings are exempt from real
estate tax imposed by local governments.
First,MIAA is not a government-owned or controlled corporation but
an instrumentality of the National Government and thus exempt from local
taxation. Second,the real properties of MIAA are owned by the Republic of
the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or
controlled corporation, is not exempt from real estate tax. Respondents
claim that the deletion of the phrase "any government-owned or controlled
so exempt by its charter" in Section 234(e) of the Local Government
Code withdrew the real estate tax exemption of government-owned or
controlled corporations. The deleted phrase appeared in Section 40(a) of
the 1974 Real Property Tax Code enumerating the entities exempt from real
estate tax.
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.
Section 10 of the MIAA Charter 9 provides:
SECTION 10. Capital.— The capital of the Authority to be
contributed by the National Government shall be increased from
Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion
(P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways
and equipment and such other properties, movable and
immovable[,] which may be contributed by the National Government
or transferred by it from any of its agencies, the valuation of which
shall be determined jointly with the Department of Budget and
Management and the Commission on Audit on the date of such
contribution or transfer after making due allowances for
depreciation and other deductions taking into account the loans and
other liabilities of the Authority at the time of the takeover of the
assets and other properties;
(b) That the amount of P605 million as of December 31, 1986
representing about seventy percentum (70%) of the unremitted
share of the National Government from 1983 to 1986 to be remitted
to the National Treasury as provided for in Section 11 of E.O. No.
903 as amended, shall be converted into the equity of the National
Government in the Authority. Thereafter, the Government
contribution to the capital of the Authority shall be provided in the
General Appropriations Act.

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. 11This 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. 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, 12 police authority 13 and the levying of fees and
charges. 14 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." 15
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. The MIAA Charter expressly states that transforming
MIAA into a "separate and autonomous body" 16 will make its operation more
"financially viable." 17
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
government-owned or controlled corporation. 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. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative
Code, which is the governing law defining the legal relationship and status of
government entities. 
A government instrumentality like MIAA falls under Section 133(o) of
the Local Government Code, which states:
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:
xxx xxx xxx
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and local
government units. (Emphasis and underscoring supplied)

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. 19

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).
 TAScID

The power to tax which was called by Justice Marshall as the

"power to destroy" (Mc Culloch v. Maryland, supra) cannot be allowed
to defeat an instrumentality or creation of the very entity which has
the inherent power to wield it. 20

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. TheCivil Code provides:
ARTICLE 419. Property is either of public dominion or of
private ownership.
ARTICLE 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. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer
intended for public use or for public service, shall form part of the
patrimonial property of the State.

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
Codedefines 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. 21
The Airport Lands and Buildings of MIAA, which its Charter calls the
"principal airport of the Philippines for both international and domestic air
traffic," 22are 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:
According to article 344 of the Civil Code: "Property for public
use in provinces and in towns comprises the provincial and town
roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service supported by said
towns or provinces."
The said Plaza Soledad being a promenade for public use, the
municipal council of Cavite could not in 1907 withdraw or exclude
from public use a portion thereof in order to lease it for the sole
benefit of the defendant Hilaria Rojas. In leasing a portion of said
plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by
executing a contract over a thing of which it could not dispose, nor is
it empowered so to do. 
The Civil Code, article 1271, prescribes that everything which is
not outside the commerce of man may be the object of a contract,
and plazas and streets are outside of this commerce,as was
decided by the supreme court of Spain in its decision of February 12,
1895, which says: "Communal things that cannot be sold because
they are by their very nature outside of commerce are those for
public use, such as the plazas, streets, common lands, rivers,
fountains, etc." (Emphasis supplied) 23

Again in Espiritu v. Municipal Council,the Court declared that

properties of public dominion are outside the commerce of man:
...Town plazas are properties of public dominion,to be
devoted to public use and to be made available to the public in
general. They are outside the commerce of man and cannot be
disposed of or even leased by the municipality to private parties.
While in case of war or during an emergency, town plazas may be
occupied temporarily by private individuals, as was done and as was
tolerated by the Municipality of Pozorrubio, when the emergency has
ceased, said temporary occupation or use must also cease, and the
town officials should see to it that the town plazas should ever be
kept open to the public and free from encumbrances or illegal
private constructions. 24 (Emphasis supplied)

The Court has also ruled that property of public dominion, being outside
the commerce of man, cannot be the subject of an auction sale. 25
 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 26 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," 27 provide:
SECTION 83. Upon the recommendation of the Secretary of
Agriculture and Natural Resources, the President may designate by
proclamation any tract or tracts of land of the public domain as
reservations for the use of the Republic of the Philippines or of any
of its branches, or of the inhabitants thereof, in accordance with
regulations prescribed for this purposes, or for quasi-public uses or
purposes when the public interest requires it, including reservations
for highways, rights of way for railroads, hydraulic power sites,
irrigation systems, communal pastures or lequas communales,public
parks, public quarries, public fishponds, working men's village and
other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the
provisions of Section eighty-three shall be non-alienable and
shall not be subject to occupation, entry, sale, lease, or other
disposition until again declared alienable under the provisions
of this Act or by proclamation of the President.(Emphasis and
underscoring supplied)

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:
SEC. 14. Power to Reserve Lands of the Public and Private Domain
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;
xxx xxx xxx. (Emphasis supplied)

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.  DSAICa

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:
SEC. 48. Official Authorized to Convey Real Property.— Whenever
real property of the Government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the name of the
Republic of the Philippines, by the President, unless the authority
therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the
Philippines but titled in the name of any political subdivision or
of any corporate agency or instrumentality,by the executive head
of the agency or instrumentality. (Emphasis supplied)

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. 28
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:
SECTION 3. Creation of the Manila International Airport Authority.
— ...
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.(Emphasis supplied)
 SECTION 22. Transfer of Existing Facilities and Intangible Assets.—
All existing public airport facilities, runways, lands, buildings and
other property,movable or 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. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a
Division in the Bureau of Air Transportation and Transitory Provisions.—
The Manila International Airport including the Manila Domestic
Airport as a division under the Bureau of Air Transportation is hereby
abolished.
xxx xxx xxx.

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:
WHEREAS, the Manila International Airport as the principal
airport of the Philippines for both international and domestic air
traffic, is required to provide standards of airport accommodation
and service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and
other facilities, have to be upgraded to meet the current and future
air traffic and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has
indicated that the objectives of providing high standards of
accommodation and service within the context of a financially
viable operation, will best be achieved by a separate and
autonomous body;and 
WHEREAS, under Presidential Decree No. 1416, as amended
by Presidential Decree No. 1772, the President of the Philippines is
given continuing authority to reorganize the National
Government, which authority includes the creation of new
entities, agencies and instrumentalities of the Government[.]
(Emphasis supplied)

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 . . . 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:
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;
xxx xxx xxx. (Emphasis supplied)

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 . . . ." 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:
Accordingly, we hold that the portions of the land leased to
private entities as well as those parts of the hospital leased to private
individuals are not exempt from such taxes. On the other hand, the
portions of the land occupied by the hospital and portions of the
hospital used for its patients, whether paying or non-paying, are
exempt from real property taxes. 29

3. Refutation of Arguments of Minority

The minority asserts that the MIAA is not exempt from real estate tax
because Section 193 of the Local Government Code of 1991 withdrew the tax
exemption of "all persons, whether natural or juridical" upon the
effectivity of the Code. Section 193 provides:
 
SEC. 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 effectivity of
this Code. (Emphasis supplied)  ESacHC

The minority states that MIAA is indisputably a juridical person. The

minority argues that since the Local Government Code withdrew the tax
exemption of all juridical persons,then MIAA is not exempt from real estate
tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local
Government Code that the withdrawn exemptions from realty
tax cover not just GOCCs, but all persons.To repeat, the provisions
lay down the explicit proposition that the withdrawal of realty tax
exemption applies to all persons. The reference to or the inclusion of
GOCCs is only clarificatory or illustrative of the explicit provision.
The term "All persons" encompasses the two classes of
persons recognized under our laws, natural and juridical
persons. Obviously, MIAA is not a natural person. Thus, the
determinative test is not just whether MIAA is a GOCC, but
whether MIAA is a juridical person at all.(Emphasis and
underscoring in the original)

The minority posits that the "determinative test" whether MIAA is

exempt from local taxation is its status — whether MIAA is a juridical
person or not.The minority also insists that "Sections 193 and 234 may be
examined in isolation from Section 133(o) to ascertain MIAA's claim of
exemption."
The argument of the minority is fatally flawed. Section 193 of the Local
Government Code expressly withdrew the tax exemption of all juridical
persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of
the Local Government Code expressly provides
otherwise,specifically prohibiting local governments from imposing any
kind of tax on national government instrumentalities. Section 133(o) states:
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:
xxx xxx xxx
(o) Taxes, fees or charges of any kinds on the National
Government, its agencies and instrumentalities,and local
government units.(Emphasis and underscoring supplied)

By express mandate of the Local Government Code, local

governments cannot impose any kind of tax on national government
instrumentalities like the MIAA. Local governments are devoid of power to
tax the national government, its agencies and instrumentalities. The
taxing powers of local governments do not extend to the national
government, its agencies and instrumentalities, "[u]nless otherwise provided
in this Code" as stated in the saving clause of Section 133. The saving clause
refers to Section 234(a) on the exception to the exemption from real estate
tax of real property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193
itself, all juridical persons are subject to tax by local governments. The
minority insists that the juridical persons exempt from local taxation
are limited to the three classes of entities specifically enumerated as
exempt in Section 193.Thus, the minority states:
...Under Section 193, the exemption is limited to (a) local
water districts; (b) cooperatives duly registered under
Republic Act No. 6938; and (c) non-stock and non-profit hospitals
and educational institutions.It would be belaboring the obvious
why the MIAA does not fall within any of the exempt entities under
Section 193. (Emphasis supplied)

The minority's theory directly contradicts and completely negates

Section 133(o) of the Local Government Code. This theory will result in gross
absurdities. It will make the national government, which itself is a
juridical person,subject to tax by local governments since the national
government is not included in the enumeration of exempt entities in Section
193. Under this theory, local governments can impose any kind of local tax,
and not only real estate tax,on the national government.
Under the minority's theory, many national government
instrumentalities with juridical personalities will also be subject to any kind
of local tax, and not only real estate tax.Some of the national government
instrumentalities vested by law with juridical personalities are: Bangko
Sentral ng Pilipinas, 30Philippine Rice Research Institute, 31 Laguna Lake
Development Authority, 32 Fisheries Development Authority, 33 Bases
Conversion Development Authority, 34Philippine Ports Authority, 35 Cagayan
de Oro Port Authority, 36 San Fernando Port Authority, 37 Cebu Port
Authority, 38 and Philippine National Railways. 39
The minority's theory violates Section 133(o) of the Local Government
Code which expressly prohibits local governments from imposing any kind of
tax on national government instrumentalities. Section 133(o) does not
distinguish between national government instrumentalities with or
without juridical personalities.Where the law does not distinguish, courts
should not distinguish. Thus, Section 133(o) applies to all national
government instrumentalities, with or without juridical personalities.
The determinative test whether MIAA is exempt from local taxation is not
whether MIAA is a juridical person, but whether it is a national
government instrumentality under Section 133(o) of the Local Government
Code. Section 133(o) is the specific provision of law prohibiting local
governments from imposing any kind of tax on the national government, its
agencies and instrumentalities. 
Section 133 of the Local Government Code starts with the saving clause
"[u]nless otherwise provided in this Code." This means that unless
the Local Government Code grants an express authorization, local
governments have no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local governments have no power
to tax the national government, its agencies and instrumentalities. As an
exception to this rule, local governments may tax the national government,
its agencies and instrumentalities only if the Local Government
Code expressly so provides.
The saving clause in Section 133 refers to the exception to the
exemption in Section 234(a) of the Code, which makes the national
government subject to real estate tax when it gives the beneficial use of
its real properties to a taxable entity. Section 234(a) of the Local
Government Code provides:
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.
xxx xxx xxx. (Emphasis supplied)

Under Section 234(a),real property owned by the Republic is exempt from

real estate tax. The exception to this exemption is when the
government gives the beneficial use of the real property to a taxable
entity.
The exception to the exemption in Section 234(a) is the only
instance when the national government, its agencies and
instrumentalities are subject to any kind of tax by local
governments.The exception to the exemption applies only to real estate tax
and not to any other tax. The justification for the exception to the exemption
is that the real property, although owned by the Republic, is not devoted to
public use or public service but devoted to the private gain of a taxable
person.
The minority also argues that since Section 133 precedes Section 193
and 234 of the Local Government Code, the later provisions prevail over
Section 133. Thus, the minority asserts:
. . . Moreover, sequentially Section 133 antecedes Section 193
and 234. Following an accepted rule of construction, in case of
conflict the subsequent provisions should prevail. Therefore,
MIAA, as a juridical person, is subject to real property taxes, the
general exemptions attaching to instrumentalities under Section
133(o) of the Local Government Code being qualified by Sections 193
and 234 of the same law. (Emphasis supplied)

The minority assumesthat there is an irreconcilable conflict between

Section 133 on one hand, and Sections 193 and 234 on the other. No one has
urged that there is such a conflict, much less has any one presented a
persuasive argument that there is such a conflict. The minority's assumption
of an irreconcilable conflict in the statutory provisions is an egregious error
for two reasons.
First,there is no conflict whatsoever between Sections 133 and 193
because Section 193 expressly admits its subordination to other
provisions of theCode when Section 193 states "[u]nless otherwise
provided in this Code." By its own words, Section 193 admits
the superiority of other provisions of theLocal Government Code that limit
the exercise of the taxing power in Section 193. When a provision of law
grants a power but withholds such power on certain matters, there is no
conflict between the grant of power and the withholding of power. The
grantee of the power simply cannot exercise the power on matters withheld
from its power.
Second,Section 133 is entitled "Common Limitations on the Taxing
Powers of Local Government Units." Section 133 limits the grant to local
governments of the power to tax, and not merely the exercise of a delegated
power to tax. Section 133 states that the taxing powers of local governments
"shall not extend to the levy" of any kind of tax on the national
government, its agencies and instrumentalities. There is no clearer limitation
on the taxing power than this.
 
Since Section 133 prescribes the "common limitations" on the taxing
powers of local governments, Section 133 logically prevails over Section 193
which grants local governments such taxing powers. By their very meaning
and purpose, the "common limitations" on the taxing power prevail
over the grant or exercise of the taxing power.If the taxing power of local
governments in Section 193 prevails over the limitations on such taxing
power in Section 133, then local governments can impose any kind of tax on
the national government, its agencies and instrumentalities — a gross
absurdity.
Local governments have no power to tax the national government, its
agencies and instrumentalities, except as otherwise provided in the Local
Government Code pursuant to the saving clause in Section 133 stating
"[u]nless otherwise provided in this Code." This exception — which is an
exception to the exemption of the Republic from real estate tax imposed by
local governments — refers to Section 234(a) of the Code. The exception to
the exemption in Section 234(a) subjects real property owned by the
Republic, whether titled in the name of the national government, its agencies
or instrumentalities, to real estate tax if the beneficial use of such property is
given to a taxable entity.
The minority also claims that the definition in the Administrative
Code of the phrase "government-owned or controlled corporation" is not
controlling. The minority points out that Section 2 of the Introductory
Provisions of the Administrative Code admits that its definitions are not
controlling when it provides:
SEC. 2. General Terms Defined.— Unless the specific words of
the text, or the context as a whole, or a particular statute, shall
require a different meaning:
xxx xxx xxx

The minority then concludes that reliance on the Administrative

Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of
the Administrative Code recognizes that a statute may require a different
meaning than that defined in the Administrative Code. However, this does
not automatically mean that the definition in the Administrative Code does
not apply to the Local Government Code. Section 2 of the Administrative
Code clearly states that "unless the specific words ...of a particular
statute shall require a different meaning," the definition in Section 2 of
the Administrative Code shall apply. Thus, unless there is specific language in
the Local Government Code defining the phrase "government-owned or
controlled corporation" differently from the definition in the Administrative
Code, the definition in the Administrative Codeprevails.  EcSCHD

The minority does not point to any provision in the Local Government

Code defining the phrase "government-owned or controlled corporation"
differently from the definition in the Administrative Code. Indeed, there is
none. The Local Government Code is silent on the definition of the
phrase "government-owned or controlled
corporation." The Administrative Code, however, expressly defines the
phrase "government-owned or controlled corporation." The inescapable
conclusion is that the Administrative Code definition of the phrase
"government-owned or controlled corporation" applies to the Local
Government Code.
 The third whereas clause of the Administrative Code states that
the Code "incorporates in a unified document the major structural,
functional and procedural principles and rules of governance." Thus,
the Administrative Code is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and
instrumentalities. Unless a statute expressly provides for a different status
and relationship for a specific government unit or entity, the provisions of
the Administrative Code prevail.
The minority also contends that the phrase "government-owned or
controlled corporation" should apply only to corporations organized under
theCorporation Code, the general incorporation law, and not to corporations
created by special charters. The minority sees no reason why government
corporations with special charters should have a capital stock. Thus, the
minority declares:
I submit that the definition of "government-owned or
controlled corporations" under the Administrative Code refer to
those corporations owned by the government or its instrumentalities
which are created not by legislative enactment, but formed and
organized under the Corporation Code through registration with the
Securities and Exchange Commission. In short, these are GOCCs
without original charters.
xxx xxx xxx
It might as well be worth pointing out that there is no point in
requiring a capital structure for GOCCs whose full ownership is
limited by its charter to the State or Republic. Such GOCCs are not
empowered to declare dividends or alienate their capital shares.

The contention of the minority is seriously flawed. It is not in accord with

the Constitution and existing legislations. It will also result in gross
absurdities.
First, the Administrative Code definition of the phrase "government-
owned or controlled corporation" does not distinguish between one
incorporated under the Corporation Code or under a special charter. Where
the law does not distinguish, courts should not distinguish.
Second,Congress has created through special charters several
government-owned corporations organized as stock corporations. Prime
examples are the Land Bank of the Philippines and the Development Bank of
the Philippines. The special charter 40 of the Land Bank of the Philippines
provides:
SECTION 81. Capital.— The authorized capital stock of the
Bank shall be nine billion pesos, divided into seven hundred and
eighty million common shares with a par value of ten pesos
each, which shall be fully subscribed by the Government, and one
hundred and twenty million preferred shares with a par value of ten
pesos each, which shall be issued in accordance with the provisions
of Sections seventy-seven and eighty-three of this Code. (Emphasis
supplied)
 Likewise, the special charter 41 of the Development Bank of the
Philippines provides:
SECTION 7. Authorized Capital Stock — Par value. — The
capital stock of the Bank shall be Five Billion Pesos to be divided
into Fifty Million common shares with par value of P100 per
share.These shares are available for subscription by the National
Government. Upon the effectivity of this Charter, the National
Government shall subscribe to Twenty-Five Million common shares
of stock worth Two Billion Five Hundred Million which shall be
deemed paid for by the Government with the net asset values of the
Bank remaining after the transfer of assets and liabilities as provided
in Section 30 hereof. (Emphasis supplied)

Other government-owned corporations organized as stock

corporations under their special charters are the Philippine Crop Insurance
Corporation, 42Philippine International Trading Corporation, 43 and the
Philippine National Bank 44 before it was reorganized as a stock corporation
under the Corporation Code. All these government-owned corporations
organized under special charters as stock corporations are subject to real
estate tax on real properties owned by them. To rule that they are not
government-owned or controlled corporations because they are not
registered with the Securities and Exchange Commission would remove them
from the reach of Section 234 of the Local Government Code, thus
exempting them from real estate tax.
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.(Emphasis and underscoring supplied) 

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 income to 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. 45

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. 46 (Emphasis supplied) 
DAEcIS

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.
The MIAA need not meet the test of economic viability because the
legislature did not create MIAA to compete in the market place. MIAA does
not compete in the market place because there is no competing international
airport operated by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of the Philippines.
The operation of an international airport requires the presence of personnel
from the following government agencies:
1. The Bureau of Immigration and Deportation, to document
the arrival and departure of passengers, screening out
 those without visas or travel documents, or those with
hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce
the ban on prohibited importations;
3. The quarantine office of the Department of Health, to
enforce health measures against the spread of infectious
diseases into the country;
4. The Department of Agriculture, to enforce measures against
the spread of plant and animal diseases into the country;
5. The Aviation Security Command of the Philippine National
Police, to prevent the entry of terrorists and the escape of
criminals, as well as to secure the airport premises from
terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation
and Communications, to authorize aircraft to enter or
leave Philippine airspace, as well as to land on, or take off
from, the airport; and
7. The MIAA, to provide the proper premises — such as runway
and buildings — for the government personnel,
passengers, and airlines, and to manage the airport
operations.
All these agencies of government perform government functions essential
to the operation of an international airport.
MIAA performs an essential public service that every modern State
must provide its citizens. MIAA derives its revenues principally from the
mandatory fees and charges MIAA imposes on passengers and airlines. The
terminal fees that MIAA charges every passenger are regulatory or
administrative fees 47 and not income from commercial transactions.
MIAA falls under the definition of a
government instrumentality under Section 2(10) of the Introductory
Provisions of the Administrative Code, which provides:
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)

The fact alone that MIAA is endowed with corporate powers does not
make MIAA a government-owned or controlled corporation. Without a
change in its capital structure, MIAA remains a government
instrumentality under Section 2(10) of the Introductory Provisions of
the Administrative Code. More importantly, as long as MIAA renders
essential public services, it need not comply with the test of economic
 viability. Thus, MIAA is outside the scope of the phrase "government-
owned or controlled corporations" under Section 16, Article XII of the 1987
Constitution. 
The minority belittles the use in the Local Government Code of the
phrase "government-owned or controlled corporation" as merely
"clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes
explicit conditions for the creation of "government-owned or controlled
corporations." TheAdministrative Code defines what constitutes a
"government-owned or controlled corporation." To belittle this phrase as
"clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled
corporation under Section 2(13) of the Introductory Provisions of
the Administrative Codebecause 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. (Emphasis supplied)

The term "ports ...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 theLocal Government Code.
4. Conclusion
 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 theLocal 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 . . . 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.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed
Resolutions of the Court of Appeals of 5 October 2001 and 27 September
2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings
of the Manila International Airport Authority EXEMPT from the real estate tax
imposed by the City of Parañaque. We declare VOID all the real estate tax
assessments, including the final notices of real estate tax delinquencies,
issued by the City of Parañaque on the Airport Lands and Buildings of the
Manila International Airport Authority, except for the portions that the
Manila International Airport Authority has leased to private parties. We also
declare VOID the assailed auction sale, and all its effects, of the Airport Lands
and Buildings of the Manila International Airport Authority.  ESHAcI

No costs.
SO ORDERED.
 SECOND DIVISION

[G.R. No. 221626. October 9, 2019.]

LIGHT RAIL TRANSIT AUTHORITY,petitioner, vs. QUEZON CITY,

REPRESENTED BY THE CITY TREASURER AND THE CITY
ASSESSOR,respondent.

DECISION

LAZARO-JAVIER,  J  :
p

Prefatory
The doctrine of precedents is fundamental to our legal system. It
provides certainty while permitting the orderly development of the law in
incremental steps. Stare decisis, however, is not a straitjacket which
condemns the law to stasis or a state of suspended animation and
disbelief. Where there is a change in the circumstances which
fundamentally shifts the parameters of the debate, especially the
collective thinking of the Court expressed in later decisions and the
present social milieus on which our decisions will greatly impact, we have
to understand and give effect to precedents in such new light. 
The Case
This Petition for Review 1 seeks to nullify the following dispositions
of the Regional Trial Court, Branch 95, Quezon City, in Civil Case No. Q-11-
70303, entitled "Light Rail Transit Authority  vs. Quezon City, represented by
the City Treasurer and the City Assessor" for Certiorari,Prohibition and
Injunction:
1. Decision 2 dated March 5, 2015, sustaining the realty taxes
imposed by the local government of Quezon City on the
LRTA's real properties.
2. Order dated November 3, 2015, denying the LRTA's motion for
reconsideration.
Antecedents
Pursuant to Executive Order No. 603 3 (EO 603) dated July 12, 1980,
the Light Rail Transit Authority (LRTA) was created primarily to construct,
operate, maintain, and/or lease the light rail transit system of the country.
For this purpose, the LRTA acquired real properties 4 and commenced its
operations in 1984.  CAIHTE

On October 12, 2000, the Court rendered its decision in LRTA v.

Central Board of Assessment Appeals (CBOA) 5 involving the City of
Manila's tax assessment on the LRTA's real properties consisting of lands,
buildings, carriageways and passenger terminal stations, machinery, and
equipment which the City of Manila considered taxable under the Real
Property Tax Code. The Court ruled that the LRTA's properties had already
been classified by law as patrimonial property subject to tax. 
On October 15, 2007, the LRTA received several Statements of
Delinquency and Final Notices of Tax Delinquency, this time, from
respondent Quezon City. By letter 6 dated October 15, 2007, the LRTA
informed Quezon City that pursuant to the subsequent case of MIAA v.
Court of Appeals,7 the LRTA is a government instrumentality, thus, exempt
from real property tax. 8
Through the Office of the City Treasurer, Quezon City issued
warrants of levy on the LRTA's properties on which realty taxes had not
been paid.
On November 12, 2007, the LRTA again wrote Quezon City
reiterating the effect of MIAA v. Court of Appeals 9 on its status and tax-
exemption as a government instrumentality. Despite its continuous
communication with the LRTA, however, Quezon City did not stop sending
notices to the former for collection of realty taxes of Five Hundred Fifteen
Million Two Hundred Four Thousand Seven Hundred Sixty-Nine and
Thirteen Centavos (P515,204,769.13).10
In December 2007, Quezon City auctioned the affected LRTA
properties. But for lack of any interested bidder, these properties were
instead sold to Quezon City pursuant to Sec. 263 of RA 7610, viz.:11
Registered Location Tax Assessed Actual Use
Owner Declaration Value
LRTA Loyola Heights D-056-09933 636,275,580.00 Commercial
LRTA Mariana D-061-07102 25,506,730.00 Commercial
LRTA Kaunlaran D-050-02656 281,163,250.00 Commercial
LRTA Kaunlaran D-050-02838 340,508,070.00 Commercial
LRTA Bagumbahay E-010-02906 203,751,440 Commercial
LRTA Bagumbuhay D-010-02867 33,460,930.00 Commercial
LRTA E. Rodriguez D-040-04992 420,598,970.00 Commercial
LRTA Mariana D-061-06701 212,350,740.00 Commercial
LRTA E. Rodriguez D-040-04802 340,260,790.00 Commercial
LRTA Valencia D-130-05857 102,410,250.00 Commercial
LRTA Loyola Heights D-056-09527 110,550,190.00 Commercial
LRTA Loyola Heights D-056-10467 147,668,500.00 Commercial
LRTA Marilag D-063-04730 279,948,100.00 Commercial
LRTA Valencia D-130-05856 200,072,650.00 Commercial
LRTA Mariana D-061-07103 314,349,440.00 Commercial
LRTA Kaunlaran D-050-02655 21,529,630.00 Commercial

On April 6, 2010, Quezon City again auctioned off another set of the
LRTA properties, 12 thus:
Tax Declaration Tax Liability Purchase Price
E-050-0078 33,640.10 45,000.00
E-040-01350 26,948.48 6,467.76
E-040-01433 40,568.74 16,800.00
E-40-01352 34,791.80 8,350.03
E-130-00148 6,131.10 4,800.00
 E-050-00080 7,624.78 2,400.00
E-061-00403 95,602.45 -
E-050-00084 35,048.10 -
E-063-00088 197,625.90 -

Meantime, the LRTA's right of redemption expired on April 4,

2011. 13 It thus filed a petition for certiorari,prohibition and injunction
against Quezon City before the Regional Trial Court, which was raffled to
Branch 95 and docketed as Civil Case No. Q-11-70303.  DETACa

Invoking MIAA v. Court of Appeals,14 the LRTA asserted anew that it

is a government instrumentality, hence, exempt from real property tax. 15
For its part, Quezon City countered that the LRTA is not a
government instrumentality but a government-owned and controlled
corporation (GOCC). Its activities are proprietary in nature and not purely
governmental. It is clothed with corporate status and powers, earns profit,
and operates as an ordinary private corporation. EO 603 does not exempt
the LRTA from real property taxes. The Local Government Code of
1991 has removed or withdrawn the tax exemptions of GOCCs. Consistent
with the decision in LRTA v. CBOA,16 the LRTA is thus a taxable entity. 17
The Trial Court's Ruling
By Decision dated March 5, 2015, the trial court dismissed the
petition. It held, among others, that the LRTA properties are taxable based
on the Local Government Code and the Constitution. It further ruled that
the taxability of the LRTA properties was already settled in LRTA v.
CBOA.The LRTA's reliance on MIAA  v. CA was, therefore, allegedly
misplaced. 
The LRTA's motion for reconsideration was denied through Order
dated November 3, 2015. 18
The Present Petition
The LRTA now urges the Court to nullify the trial court's dispositions
regarding its liability for real property tax. It reiterates that it is not a
GOCC but a government instrumentality, hence, its properties are not
taxable. The decision in Mactan Cebu International Airport (MCIAA) v.
City of Lapu-Lapu 19citing the 2006 MIAA case, superseded LRTA v.
CBOA.Its properties belong to the Republic of the Philippines and are
intended for public use, hence, exempt from real property taxes. 20
In its Comment, 21 Quezon City ripostes, in the main: a) the LRTA is
not a government instrumentality but a GOCC; b) its activities are
proprietary and not purely governmental; and c) it is profit earning and
operating like a private corporation. 
aDSIHc

Issues
1) Is the LRTA a GOCC or a government instrumentality; and
2) Are the LRTA's properties subject to real property tax?
Ruling
 The Local Government Code provides for the exercise by local
government units of the power to tax, its scope or limitations, and those
who are exempt from local taxation. On this score, Section 232 of
the Code recognizes the power of the local government units to tax real
property not otherwise exempt therefrom, viz.:
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. 
Section 234 of the Code further enumerates the properties exempt
from real property tax, viz.:
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
environmental protection.  ETHIDa

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.
Section 234 of the Local Government Code (LGC) has withdrawn the
previous real property tax exemptions granted to natural or juridical
persons, including government-owned or controlled corporations, except
as otherwise provided therein. The law ordains that only real properties
owned by the Republic of the Philippines or any of its political subdivisions
are exempt from real property tax. 
The LRTA is not a government
owned and controlled
corporation (GOCC).
 The Administrative Code of 1987 defines a government owned and
controlled corporation (GOCC) in this wise:
(13) government-owned or controlled corporations refer 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
indirectly through its instrumentalities either wholly, or where
applicable as in the case of stock corporations to the extent of at
least 51% (fifty-one percent) of its capital stock. 
cSEDTC

Indeed, an agency is a government-owned or controlled corporation

when it is organized as a stock or non-stock corporation. A stock
corporation is one that sources its capital through shares of stock and
therefore has a share capital or capital stock, not just capital, whose
capital stock is divided into shares, and who is authorized to distribute
dividend to the holders of such share. 22 A non-stock corporation, on the
other hand, is one where no part of its income is distributable as
dividends to its members, trustees, or officers. A non-stock corporation
must have members. 23
Consequently, to be considered as a GOCC, an entity must either be
organized as a stock or non-stock corporation. Three (3) requisites must
concur for one to be classified as a stock corporation, viz.:(1) it has capital
stock,(2) the capital stock is divided into shares, and (3) it is authorized to
distribute dividends and allotments of surplus and profits to its
stockholders. As for non-stock corporations, they must have members
and must not distribute any part of their income to said members. 24
Section 15 of the LRTA's Charter 25 decrees:
Sec. 15. Capitalization. — The Authority shall have an
authorized capital of FIVE HUNDRED MILLION PESOS
(P500,000,000.00) which shall be fully subscribed by the Republic of
the Philippines and other government institutions, corporations,
instrumentalities, and agencies, whether national or local, within
the framework of their respective charters. 
The LRTA has statutory capital — but not capital stock or share
capital. The wording of its capital structure is similar to that of the Manila
International Airport Authority (MIAA). Section 10 of the MIAA Charter
provides:
SECTION 10. Capital.— The capital of the Authority to be
contributed by the National Government shall be increased from
Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion
(P10,000,000.00) Pesos to consist of ...(emphasis added)
Under their respective Charters, both the LRTA and the MIAA do not
have capital stock that is divided into shares. To repeat, Section 3 of
theCorporation 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 dividends x x x." The LRTA and the MIAA have capital but it
is not a capital stock or share capital, which is not divided into shares of
stock. Neither of them has stockholders nor voting shares. Hence, the
LRTA — as the MIAA — is not a stock corporation.  SDAaTC

The LRTA 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 the LRTA, this will not make the LRTA 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." The LRTA is not organized for any of these
purposes. As a public utility, it is organized to operate the light rail transit
system for public use. 
In any case, having a GOCC status does not at once disqualify one
from real property tax exemption. Having a GOCC status simply means
that the GOCC must find a legal basis for claiming real property tax
exemption other than what was previously granted to it under the old real
property tax laws which Local Government Code has already repealed. It is
in this light that the LRTA's status as a government instrumentality assumes
importance for the purpose of claiming real property tax exemption.  acEHCD

The LRTA is a government

instrumentality exercising corporate
powers
Is the LRTA a government instrumentality exempt from real
property tax?
Respondent maintains that the LRTA is not a government
instrumentality but per LRTA v. CBOA,one clothed with corporate status
and powers necessary in the furtherance of its proprietary objectives. It
operates much like any private corporation engaged in the mass transport
industry. Since it is engaged in a service-oriented commercial endeavor,
its carriageways and terminal stations are consequently patrimonial
property subject to tax.
A dispassionate closer reading of LRTA v. CBOA reveals what  it is
not.It never held at all, that having a corporate status and corporate
powers per seautomatically disqualifies the entity from claiming real
property tax exemption. For corporate status and corporate powers came
about in LRTA v. CBOAsimply to illustrate and reinforce the  holding  that
LRTA's operation is that of an ordinary business,  which is to earn
profit.Thus:
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. ...These carriageways and terminal stations serve a
function different from that of the public roads. The former are
part and parcel of the light rail transit (LRT) system which, unlike
the latter, are not open to use by the general public. The
carriageways are accessible only to the LRT trains, while the
terminal stations have been built for the convenience of LRTA
itself and its customers who pay the required fare.
Basis of Assessment is Actual Use of Real Property
Under the Real Property Tax Code, real property is classified for
assessment purposes on the basis of actual use, which is defined
as "the purpose for which the property is principally or
predominantly utilized by the person in possession of the
property. SDHTEC

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.(emphasis
added)
In fine, LRTA v. CBOA was decided against the LRTA because of the
conclusions of law then that the principal or predominant use of the LRTA
properties was for ordinary business, that is, an activity for earning
money, and as such, the LRTA was disqualified from real property tax
exemption. The ruling was not because LRTA had corporate status and
corporate powers, as these matters were used merely to prop up the
foregoing conclusions of law.
LRTA v. CBOA has to be understood now in light of the
developments brought about by the 2006 ruling in MIAA  v. CA and 2015
case law of MCIAA  v. City of Lapu-Lapu,reiterating MIAA  v. CA.The
conclusions reached in LRTA v. CBOA must also be considered in light
of present-day social milieu of great public impact from which we
cannot isolate our decision. AScHCD

Our inquiry begins with the status of LRTA as a government

instrumentality.
 Subsection 10 (10) of the Administrative Code of 1987 defines an
"Instrumentality as 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." The Court had on several occasions clarified
that the legal vesture of corporate powers in a government
instrumentality does not negate its status as such.
Notably, what is defined in the Administrative Code of 1987 is an
"instrumentality." The category of an instrumentality with corporate
powers cameinto being by virtue of this Court's pronouncement in MIAA
v. Court of Appeals.Citing Section 2 (10) of the Administrative Code of 1987,
the Court characterized the Manila International Airport Authority (MIAA)
as an instrumentality with corporate powers:
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. — 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 
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 x x x 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
xxx
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 government-owned or controlled
corporation x x x These government instrumentalities are
sometimes loosely called government corporate entities. However,
they are not government-owned or controlled corporations in the
strict sense as understood under the Administrative Code, which is
the governing law defining the legal relationship and status of
government entities. 
AcICHD
 This classification was eventually adopted in Executive Order No.
596 (EO 596) which was enacted into law on December 29, 2006. It
acknowledged the third classification of a government agency in addition
to GOCCs and instrumentalities, viz.:government instrumentalities vested
with corporate powers and named as "government corporate entities"
(GCE). EO 596 includes GCEs within the jurisdiction of the Office of the
Government Corporate Counsel (OGCC). Section 1 of EO 596 states:
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 office of "government instrumentality vested
with corporate powers" or "government corporate entity," as
defined by the Supreme Court in the case of "MIAA  vs. 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.
In 2011, RA No. 10149, the GOCC Governance Act of 2011 was passed
into law adopting such new category under EO 596:
(n) Government Instrumentalities with Corporate Powers
(GICP)/Government Corporate Entities (GCE) refer to instrumentalities
or agencies of the government, which are neither corporations nor
agencies integrated within the departmental framework, but vested
by law with special functions or jurisdiction, endowed with some if
not all corporate powers, administering special funds, and enjoying
operational autonomy usually through a charter including, but not
limited to, the following: the Manila International Airport
Authority (MIAA), the Philippine Ports Authority (PPA), the Philippine
Deposit Insurance Corporation (PDIC), the Metropolitan Waterworks
and Sewerage System (MWSS),the Laguna Lake Development
Authority (LLDA),the Philippine Fisheries Development Authority
(PFDA),the Bases Conversion and Development Authority
(BCDA),the Cebu Port Authority (CPA),the Cagayan de Oro Port
Authority, the San Fernando Port Authority, the Local Water Utilities
Administration (LWUA) and the Asian Productivity Organization
(APO). TAIaHE

Thus, the classification of Government Instrumentalities with

Corporate Powers (GICP)/Government Corporate Entities is now officially
recognized.
Examples of instrumentalities of the national government vested
with corporate powers are the Manila International Airport Authority,
the Philippine Fisheries Development Authority, the Government Service
Insurance System, and the Philippine Reclamation Authority. These
entities are government instrumentalities because each of them is not
integrated within the department framework and is vested with special
functions to carry out a declared policy of the national government. 26
An agency will be classified as a government instrumentality vested
with corporate powers when the following elements concur: a) it performs
governmental functions, and b) it enjoys operational autonomy. It does
not matter that the government instrumentality is endowed with
corporate powers. 
The characterization of government instrumentality is not lost
where the government entity possesses corporate status. These are not
polar opposites. This is so especially when, despite the corporate status, it
is really the resources and reputation of the Republic for a paramount
public purpose that are at stake in the capitalization and operations of the
government entity.
Here, the LRTA bears the elemental characteristics of a government
instrumentality vested with corporate powers.Consider:
One.The vesture of its corporate powers is found in Article 2
of Executive Order 603 otherwise known as "Creating a Light Rail Transit
Authority, Vesting the same with Authority to Construct and Operate the
Light Rail Transit (LRT) project and providing funds therefor," viz.:
ARTICLE 2
CORPORATE POWERS
SEC. 4. General Powers.— The Authority, through the Board of
Directors, may undertake such actions as are expedient for or
conducive to the attainment of the purposes and objectives of the
Authority, or of any purpose reasonably incidental to or
consequential upon any of these purposes. x x x. 
cDHAES

Two.The LRTA performs governmental functions.It is primarily

responsible for the construction, operation, maintenance, and/or lease of
light rail transit systems in the country, giving due regard to the
reasonable requirements of the public transportation system of the
country. 27 As explained in more detail below, the LRTA's functions are less
commercial than governmental, and more for public use and public
welfare than for profit-oriented services.
Three.The LRTA also enjoys operational autonomy,as it exists by
virtue of a Charter, and its powers and functions are vested in and
exercised by its Board of Directors. 28
The next inquiry hinges on the tax-exempt status of government
instrumentalities vested with corporate powers. 
Respondent relies on LRTA v. CBOA case in arguing that the LRTA's
real properties are not tax exempt. We should however tread carefully
when reading LRTA v. CBOA.The Court has already clarified the tax-
exempt status of government instrumentalities vested with corporate
powers in the following cases:
In MIAA v. Court of Appeals,29 the Court pronounced that MIAA is a
government instrumentality vested with corporate powers to perform
efficiently its governmental functions. A
government instrumentality like MIAA falls under Section 133 (o) of
the Local Government Code which recognizes the basic principle that local
governments cannot tax the national government.  ASEcHI

In Philippine Fisheries Development Authority (PFDA) v. Court of

Appeals,30 the Court held that PFDA is an instrumentality of the national
government, hence, exempt from real property tax, albeit the exemption
does not extend to such portions of the property, the beneficial use of
which are vested in private entities. In any event, when local governments
invoke the power to tax on national government instrumentalities, such
power is construed strictly against local governments.
In MIAA  v. City of Pasay,31 the Court reiterated that MIAA is a
government instrumentality exempt from any kind of tax from the local
governments. 
In Government Service Insurance System v. City Treasurer of the
City of Manila 32 the Court ruled that GSIS as an instrumentality of the
national government is itself not liable to pay real estate taxes assessed
by the City of Manila against its Katigbak and Concepcion-Arroceros
properties. The liability devolves on the taxable beneficial user of these
properties, but not upon GSIS and any of its properties though the subject
of transactions. Consequently, the Katigbak property cannot be subject to
a public auction sale, notwithstanding the realty tax delinquency assessed
on this property. This means that the City of Manila may satisfy its tax
claim by assessing the taxable beneficial user of the Katigbak property
and, in case of nonpayment, by execution, but through means other than
the sale at public auction of the leased property of GSIS. 33
In City of Lapu-Lapu v. Phil. Economic Zone Authority, (PEZA),34 the
Court held that PEZA is an instrumentality of the national government.
Further, the lands owned by the PEZA are real properties owned by the
Republic of the Philippines itself. The City of Lapu-Lapu and the Province
of Bataan therefore, cannot collect real property taxes from the PEZA. 
ITAaHc

In Mactan-Cebu International Airport Authority (MCIAA) v. City of

Lapu-Lapu  and Pacaldo,35 the Court reiterated that MCIAA like MIAA is an
instrumentality of the government; thus, its properties which are actually,
solely, and exclusively used for public purposes, consisting of the airport
terminal building, airfield, runway, taxiway and the lots on which they are
situated, are not subject to real property tax and respondent City was not
justified in collecting taxes from the MCIAA on these properties.
In the fairly recent case of Metropolitan Waterworks and Sewerage
System v. Local Government of Quezon,36 the Court stressed anew that a
government instrumentality exercising corporate powers is not liable for
real property taxes on its properties unless it is alleged and proven that
the beneficial use of its properties has been extended to a taxable
person. 
In sum, a government instrumentality though vested with
corporate powers are exempt from real property tax, but the exemption
shall not extend to taxable private entities to whom the beneficial use of
the government instrumentality's properties has been vested. The taxable
private entities are subject to real property tax, but not the government
instrumentality they have dealt with, much less, the properties of the
government instrumentality subject of such beneficial use.
Government entities falling under this category are exempt from
real property tax. The reason for this exemption is found in Subsection
133 (o) of theCode, viz.:
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:
xxx xxx xxx
(o) Taxes, fees or charges of any kind on the National Government,
its agencies and instrumentalities and local government units.
As eruditely explained in MIAA  v. CA:
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."  CHTAIc

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.:37
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.  EATCcI

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:38
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." (citations omitted)
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).
 DHITCc

The power to tax which was called by Justice

Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has
the inherent power to wield it.
The LRTA operations and properties
of public dominion are devoted to
public use and public welfare, hence,
are owned by the Republic of the
Philippines, and for legal and socially
significant reasons, are exempt from
real property taxes and the means to
collect such taxes.
The analysis provided by the En Banc decision in MIAA  v. CA fully
demonstrates that LRTA is not engaged in a profit-earning business like a
private corporation. LRTA v. CBOA held that LRTA was engaged in an
ordinary business because it was charging fees for the use of its
properties. This reasoning no longer holds water. We adopt in full the
disquisition of the En Banc in MIAA  v. CA:
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.  cEaSHC

Verily, MIAA  v. CA relevantly addresses the present social milieu

which the provision of public transportation plays in the lives of our
people. Indeed, with so much public expenses to take care of, the
government cannot be left alone to fully fund all public services which are
essential to the viability of our communities, most especially our means of
public transportation. Hence, the mere fact that consumers must pay all,
or in the case of the operations of our light rail transit, some of the
expenses, should not detract from the nature of the service the
government entity offers or the characterization of all the infrastructure
which the operations require.
To be sure, the LRTA and its properties are tasked to establish the
light rail transit in the country. To pursue this mandate and purpose, the
LRTA pioneered the construction of light rail transit infrastructure, which
was financed through foreign loans. The revenues from the LRTA
operations were designed to pay for the loans incurred for its
construction. The LRTA operations were intended as a public utility rather
than as a profit-making mechanism. 39The income which the LRTA
generates is being used for its operations, especially the maintenance of
rail tracks and trains. Section 2 of EO 603 provides for the re-capitalization
of excess revenues and for such other purposes that will enhance the
LRTA's mandate and purpose: 
The Authority shall conduct its business, according to
prudent commercial principles and shall ensure, as far as possible,
that its revenues for any given year are, at least sufficient to meet
its expenditures. Any excess of revenues over expenditure in any
fiscal year may be applied by the Authority in any way consistent
with this Order, including such provisions for the renewal of capital
assets and the repayment of loans, as the Authority may consider
prudent. CTIEac

Based on an independent 2008-2009 field survey report, the LRTA

income barely covered costs for operating expenses. The operating profit
from the operation of Lines 1 and 2 was in a deficit. Reasons for plus net
income in certain years were due to foreign exchange gain and infusion of
subsidies from the government. 40
As both a matter of social data and acceptable legal reasoning, it is
erroneous to conclude that to date,the LRTA has been engaged in profit-
making business. More than ever,its gargantuan tasks are to establish
and operate a viable public transportation system via the light rail trains
to address the demands of the riding public and to alleviate the
worsening traffic and transportation situation at least in Metro Manila. 41
Given the mandate and purpose of the LRTA, it stands to reason
that the LRTA's railroads, carriageways, terminal stations, and the lots on
which they are found and/or constructed are properties of public
dominion intended for public use. As such, they are exempt from real
property tax under Section 234 (a) of the Local Government Code. 
City of Lapu-Lapu v. Phil. Economic Zone Authority  42 teaches:
Properties of public dominion are outside the commerce of
man. These properties are exempt from "levy, encumbrance or
disposition through public or private sale. As this court explained
in Manila  International  Airport  Authority:
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. 
SaCIDT

On the other hand, all other properties of the state that are
not intended for public use or are not intended for some public
service or for the development of the national wealth are
patrimonial properties. Article 421 of the Civil Code of the
Philippines provides:
Art. 421. All other property of the State, which is not of
the character stated in the preceding article, is
patrimonial property.
Patrimonial properties are also properties of the state, but
the state may dispose of its patrimonial property similar to private
persons disposing of their property. Patrimonial properties are
within the commerce of man and are susceptible to prescription,
unless otherwise provided. 
MIAA  v. CA identifies the locus of ownership of properties of public
dominion for public use — the Republic of the Philippines. If any of these
properties are titled in the name of specific government entities, the latter
only hold the legal title for the ultimate benefit of the Republic and the
sovereignty.
The light rail transit system is one of the major means of
transportation in Metro Manila. The bulk of public commuters takes the
light rail transit to go to and from their residences and places of work and
other places of social interaction.  cHECAS

The light rail transit passes along several cities and municipalities.
There are two (2) LRT lines, the green and blue lines. The Light Rail Transit
System Line No. 1 consists of the 15km elevated railway system servicing
the Taft Avenue-Rizal Avenue route between Baclaran, Pasay City and the
Bonifacio Monument in the City of Caloocan. The Megatren, more
popularly known by its generic name Line 2, is a 13.8km mass transit line
that traverses five (5) cities in Metro Manila, namely Pasig, Marikina,
Quezon City, San Juan, and Manila, along the major thoroughfares of
Marcos Highway, Aurora Boulevard, Ramon Magsaysay Boulevard,
Legarda, and Recto Avenue. 43
Undoubtedly, the light rail transit performs a crucial role in the lives
of the people in Metro Manila. And the fact that by necessary implication,
it has to pass through several local government units, the protection
accorded to properties of public dominion for public use must be
extended to the LRTA and its properties. Taking some or a portion of the
railroads, railways, carriageways, and terminal stations will literally
hamper the operation of the light rail transit. Trains run on the rail tracks
which are fastened to a concrete foundation resting on a prepared
subsurface. 44 Like an airport, the light rail transit has a terminal
commonly known as the LRT station. It is a hub where passengers
converge to buy train tickets and access the train facilities. 45 It is also
where the trains regularly stop to load or unload passengers. 46 These
properties are essential for the passenger transport and continued
operation of the light rail transit, without which this massive
transportation system will be paralyzed. 
The fact that the LRTA may have entered into transactions with,
short of alienating them, to private parties in relation to the
establishment, operation, maintenance, and viability of a light rail transit
in the country, does not detract from the characterization of the LRTA's
properties as properties of public dominion for public use or public
service. What is important is the role, nexus, and relevance that these
properties play in the public use or public service purposes of the
LRTA. AHDacC

ACCORDINGLY,the Court GRANTS the petition and NULLIFIES the

Decision dated March 5, 2015 and Resolution dated November 3, 2015 of
the Regional Trial Court, Branch 95, Quezon City, in Civil Case No. Q-11-
70303.
The Court DECLARES that:
1. The Light Rail Transit Authority (LRTA) and its properties utilized in
relation to the establishment, operation, maintenance, and
viability of the light rail transit in the country
are EXEMPT from real property taxes, among them, those
imposed by the local government of Quezon City. 
2. All real property tax assessments, as well as final notices of real
property tax delinquencies issued by the Quezon City
government on the Light Rail Transit Authority and its
properties are VOID.
3. The December 2007 and April 6, 2010 sales at public auction of
the properties of the Light Rail Transit Authority, the forfeiture
and purchase of these properties by the local government of
Quezon City, and the corresponding Certificates of Sale of
Delinquent Property issued to the local government of
Quezon City are VOID.
4. The local government of Quezon City may assess and
collect real property taxes only from those private parties, if
any, to whom the Light Rail Transit Authority may have leased
its real property for use by private parties for their private
purpose.  IDSEAH

SO ORDERED.
Carpio, Caguioa, J.C. Reyes, Jr.  and  Zalameda,concur.