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F9 Manila International Airport Authority vs. CA
F9 Manila International Airport Authority vs. CA
F9 Manila International Airport Authority vs. CA
Those intended for public use, such as roads, canals, rivers, 596
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 596 SUPREME COURT REPORTS ANNOTATED
national wealth. (Emphasis supplied) ARTICLE 421. All other
Manila International Airport Authority vs. Court of Appeals 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
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 597
character of the road.
599
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 VOL. 495, JULY 20, 2006 599
Republic. The MIAA Charter expressly provides that the Airport
Manila International Airport Authority vs. Court of Appeals
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 ity, is not a taxable person under Section 133(o) of the Local
retained the beneficial ownership of the Airport Lands and Government Code.—The Republic may grant the beneficial use of
Buildings because under Article 428 of the Civil Code, only the its real property to an agency or instrumentality of the national
“owner has the right to x x x dispose of a thing.” Since MIAA government. This happens when title of the real property is
cannot dispose of the Airport Lands and Buildings, MIAA does not transferred to an agency or instrumentality even as the Republic
own the Airport Lands and Buildings. At any time, the President remains the owner of the real property. Such arrangement does
can transfer back to the Republic title to the Airport Lands and not result in the loss of the tax exemption. Section 234(a) of the
Buildings without the Republic paying MIAA any consideration. Local Government Code states that real property owned by the
Under Section 3 of the MIAA Charter, the President is the only Republic loses its tax exemption only if the “beneficial use thereof
one who can authorize the sale or disposition of the Airport Lands has been granted, for consideration or otherwise, to a taxable
and Buildings. This only confirms that the Airport Lands and person.” MIAA, as a government instrumentality, is not a taxable
Buildings belong to the Republic. person under Section 133(o) of the Local Government Code. Thus,
even if we assume that the Republic has granted to MIAA the
Taxation; Local Government Code; Section 234(a) of the Local beneficial use of the Airport Lands and Buildings, such fact does
Government Code exempts from real estate tax any “real property not make these real properties subject to real estate tax.
owned by the Republic of the Philippines.”—Section 234(a) of the
Local Government Code exempts from real estate tax any “[r]eal Same; Same; Taxation; Portions of the Airport Lands and
property owned by the Republic of the Philippines.” Section 234(a) Buildings that MIAA leases to private entities are not exempt from
provides: SEC. 234. Exemptions from Real Property Tax.—The real estate tax.—Portions of the Airport Lands and Buildings that
following are exempted from payment of the real property MIAA leases to private entities are not exempt from real estate
tax: (a) Real property owned by the Republic of the tax. For example, the land area occupied by hangars that MIAA
Philippines or any of its political subdivisions except when the 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 Taxation; The saving clause in Section 133 of the Local
a consideration to a taxable person and therefore such land area is Government Code refers to the exception to the exemption in
subject to real estate tax. In Lung Center of the Philippines v. Section 234(a) of the Code, which makes the national government
Quezon City, 433 SCRA 119, 138 (2004), the Court ruled: subject to real estate tax when it gives the beneficial use of its real
Accordingly, we hold that the portions of the land leased to properties to a taxable entity; The exception to the exemption in
private entities as well as those parts of the hospital leased to Section 234(a) is the only instance when the national government,
private individuals are not exempt from such taxes. On the other its agencies and instrumentalities are subject to any kind of tax by
hand, the portions of the land occupied by the hospital and local governments.—The saving clause in Section 133 refers to the
portions of the hospital used for its patients, whether paying or exception to the exemption in Section 234(a) of the Code, which
non-paying, are exempt from real property taxes. makes the national government subject to real estate tax when it
gives the beneficial use of its real properties to a taxable
Same; Taxation; By express mandate of the Local Government entity. Section 234(a) of the Local Government Code provides:
Code, local governments cannot impose any kind of tax on national SEC. 234. Exemptions from Real Property Tax.—The following
government instrumentalities like the MIAA.—By express are exempted from payment of the real property tax: (a)
mandate of the Local Government Code, local governments cannot Real property owned by the Republic of the Philippines or
impose any kind of tax on national government instrumentalities any of its political subdivisions except when the beneficial use
like the MIAA. Local governments are devoid of power to tax the thereof has been granted, for consideration or otherwise,
national government, its agencies and instrumentalities. The to a taxable person. x x x. (Emphasis supplied) Under Section
taxing powers of local governments do not extend to the national 234(a), real property owned by the Republic is exempt from real
government, its agencies and instrumentalities, “[u]nless estate tax. The exception to this exemption is when the
otherwise provided in this Code” as stated in the saving clause of government gives the beneficial use of the real property to a
Section 133. The saving clause refers to Section 234(a) on the taxable entity. The exception to the exemption in Section 234(a) is
exception to the exemption from real estate tax of real property the only instance when the national government, its agencies and
owned by the Republic. 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
600
exception to the exemption is that the real property, although
owned by the Republic, is not devoted to public use or public
600 SUPREME COURT REPORTS ANNOTATED service but devoted to the private gain of a taxable person.
603
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 VOL. 495, JULY 20, 2006 603
government-owned or controlled corporation must meet the test of
Manila International Airport Authority vs. Court of Appeals doctrines? None is given, for the majority takes comfort instead in
the pretense that these precedents never existed. Only children
compete in the market place. MIAA does not compete in the 604
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. 604 SUPREME COURT REPORTS ANNOTATED
Same; Taxation; Administrative Law; There really is no find another way to collect the taxes due from MIAA, thus paving
prohibition against the government taxing itself, and nothing the way for a mutually acceptable negotiated solution.
obscene with allowing government entities exercising proprietary
functions to be taxed for the purpose of raising the coffers of LGUs. Same; Same; The prohibition in Section 3 of the MIAA
—There really is no prohibition against the government taxing Charter against the sale or disposition of MIAA properties without
itself, and nothing obscene with allowing government entities the consent of the President prevents the peremptory closure of the
MIAA or the hampering of its operations on account of the Local Government Code; Taxation; Bangko Sentral ng
demands of its creditors—the airport is important enough to be Pilipinas; If the BSP is already preternaturally exempt from local
sheltered by legislation from ordinary legal processes.—There are taxation owing to its personality as a “government
several other reasons this statutory limitation should be upheld instrumentality,” why then the need to make a new grant of
and applied to this case. It is at this juncture that the importance exemption, which if the majority is to be believed, is actually a
of the Manila Airport to our national life and commerce may be redundancy.—The New Central Bank Act was promulgated after
accorded proper consideration. The closure of the airport, even by the Local Government Code if the BSP is already preternaturally
reason of MIAA’s legal omission to pay its taxes, will have an exempt from local taxation owing to its personality as an
injurious effect to our national economy, which is ever reliant on “government instrumentality,” why then the need to make a new
air travel and traffic. The same effect would obtain if ownership grant of exemption, which if the majority is to be believed, is
and administration of the airport were to be transferred to an actually a redundancy. But even more tellingly, does not this
LGU or some other entity which were not specifically chartered or provision evince a clear intent that after the lapse of five (5)
tasked to perform such vital function. It is for this reason that the years, that the Bangko Sentral will be liable for provincial,
MIAA charter specifically forbids the sale or disposition of MIAA municipal and city taxes? This is the clear congressional intent,
properties without the consent of the President. The prohibition and it is Congress, not this Court which dictates which entities
prevents the peremptory closure of the MIAA or the hampering of are subject to taxation and which are exempt.
its operations on account of the demands of its creditors. The
airport is important enough to be sheltered by legislation from
Courts; Supreme Court; Judgments; One might say, certainly
ordinary legal processes.
a decision of the Supreme Court cannot be construed to promote an
absurdity, but precisely the majority, and the faulty reasoning it
Same; Same; Had this petition been denied instead with utilizes, opens itself up to all sorts of mischief, and certainly, a tax-
Mactan as basis, but with the caveat that the MIAA properties exempt massage parlor is one of the lesser evils that could arise
could not be subject of execution sale without the consent of the from the majority ruling.—Consider further the example of the
President, I suspect that the parties would feel little distress— Philippine Institute of Traditional and Alternative Health Care
unfortunately, the majority will cause precisely the opposite result (PITAHC), created by Republic Act No. 8243 in 1997. It has
of unremitting hostility, not only to the City of Parañaque, but to similar characteristics as MIAA in that it is established as a body
the thousands of LGUs in the country.—Had this petition been corporate, and empowered with the attributes of a corporation,
denied instead with Mactan as basis, but with the caveat that the including the power to purchase or acquire real properties.
MIAA properties could not be subject of execution sale without However the PITAHC has no capital stock and no members, thus
the consent of the President, I suspect that the parties would feel following the majority, it is not a GOCC. The state policy that
little distress. Through such action, both the Local Government guides PITAHC is the development of traditional and alternative
Code and the MIAA charter would have been upheld. The health care, and its objectives include the promotion and advocacy
prerogatives of LGUs in real property taxation, as guaranteed by of alternative, preventive and curative health care modalities that
the Local Government Code, would have been preserved, yet the have been proven safe, effective and cost effective. “Alternative
concerns about the ruinous effects of having to close the Manila health care modalities” include “other forms of non-allophatic,
International Airport would have been averted. The parties would occasionally non-indigenous or imported healing methods” which
then be compelled to try harder at working out a compromise, a include, among others “reflexology, acupuncture, massage,
task, if I might add, they are all too willing to engage in. acupressure” and chiropractics. Given these premises, there is no
Unfortunately, the majority will cause precisely the opposite impediment for the PITAHC to purchase land and construct
result of unremitting hostility, not only to the City of Parañaque, thereupon a massage parlor that would provide a cheaper
but to the thousands of LGUs in the country. alternative to the opulent spas that have proliferated around the
metropolis. Such activity is in line with the purpose of the
609
PITAHC and with state policy. Is such massage parlor exempt
from realty taxes? For the majority, it is, for PITAHC is an
instrumentality or agency exempt from local government
VOL. 495, JULY 20, 2006 609 taxation, which does not fall under the exceptions under Section
234 of the Local Government Code. Hence, this massage parlor
Manila International Airport Authority vs. Court of Appeals
would not just be a shelter for frazzled nerves, but for taxes as
well. Ridiculous? One might say, certainly a decision of the
Supreme Court
4 Section 22, MIAA Charter.
610 5 Section 3, MIAA Charter.
611
614
613
614 SUPREME COURT REPORTS ANNOTATED 615
Section 3 of the Corporation Code defines a stock SEC. 2. General Terms Defined.––x x x x
corporation as one whose “capital stock is divided into (10) Instrumentality refers to any agency of the National
shares and x x x authorized to distribute to the holders of Government, not integrated within the department framework,
such shares dividends x x x.” MIAA has capital but it is not vested with special functions or jurisdiction by law, endowed
divided into shares of stock. MIAA has no stockholders or with some if not all corporate
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 11 Section 11 of the MIAA Charter provides:
distributable as dividends to its members, trustees or
Contribution to the General Fund for the Maintenance and Operation of other
officers.” A non-stock corporation must have members.
Airports.—Within thirty (30) days after the close of each quarter, twenty per
Even if we assume that the Government is considered as
centum (20%) of the gross operating income, excluding payments for utilities of
the sole member of MIAA, this will not make MIAA a non-
tenants and concessionaires and terminal fee collections, shall be remitted to the _______________
General Fund in the National Treasury to be used for the maintenance and
operation of other international and domestic airports in the country. Adjustments
12 Section 5(j), MIAA Charter.
in the amount paid by the Authority to the National Treasury under this Section
13 Section 6, MIAA Charter.
shall be made at the end of each year based on the audited financial statements of
14 Section 5(k), MIAA Charter.
the Authority.
15 Section 5(o), MIAA Charter.
16 Third Whereas Clause, MIAA Charter.
618 17 Id.
619
618 SUPREME COURT REPORTS ANNOTATED
Manila International Airport Authority vs. Court of VOL. 495, JULY 20, 2006 619
Appeals
Manila International Airport Authority vs. Court of
Appeals
powers, administering special funds, and enjoying operational
autonomy, usually through a charter. x x x (Emphasis supplied)
not government-owned or controlled corporations in the
When the law vests in a government instrumentality strict sense as understood under the Administrative Code,
corporate powers, the instrumentality does not become a which is the governing law defining the legal relationship
corporation. Unless the government instrumentality is and status of government entities.
organized as a stock or non-stock corporation, it remains a A government instrumentality like MIAA falls under
government instrumentality exercising not only Section 133(o) of the Local Government Code, which states:
governmental but also corporate powers. Thus, MIAA 12
620 19 274 Phil. 1060, 1100; 197 SCRA 771, 799 (1991) quoting C. Dallas
Sands, 3 STATUTES and STATUTORY CONSTRUCTION 207.
course of its operations. For these reasons, provisions granting as to prevent it from consummating its federal responsibilities, or even to
exemptions to government agencies may be construed liberally, in seriously burden it in the accomplishment of them.” (Antieau, Modern
19
favor of non tax-liability of such agencies. Constitutional Law, Vol. 2, p. 140, emphasis supplied)
626
_______________
33
ment Authority,
34 Bases Conversion 35 Development The saving clause in Section 133 refers to the exception to
Authority, Philippine
36 Ports Authority, Cagayan37 de Oro the exemption in Section 234(a) of the Code, which makes
Port Authority,
38 San Fernando Port Authority,39 Cebu Port the national government subject to real estate tax when it
Authority, and Philippine National Railways. gives the beneficial use of its real properties to a taxable
The minority’s theory violates Section 133(o) of the Local entity. Section 234(a) of the Local Government Code
Government Code which expressly prohibits local provides:
governments from imposing any kind of tax on national
government instrumentalities. Section 133(o) does not SEC. 234. Exemptions from Real Property Tax.—The following
distinguish between national government instrumentalities are exempted from payment of the real property tax:
with or without juridical personalities. Where the law does (a) Real property owned by the Republic of the
not distinguish, courts should not distinguish. Thus, Philippines or any of its political subdivisions except when the
Section 133(o) applies to all national government beneficial use thereof has been granted, for consideration
instrumentalities, with or without juridical personalities. or otherwise, to a taxable person.
The determinative test whether MIAA is exempt from local x x x. (Emphasis supplied)
taxation is not whether MIAA is a juridical person, but
Under Section 234(a), real property owned by the Republic
whether it is a national government instrumentality under
is exempt from real estate tax. The exception to this
Section 133(o) of the Local Government Code. Section
exemption is when the government gives the beneficial use
133(o) is the specific provision of law prohibiting local
of the real property to a taxable entity.
governments from imposing any kind of tax on the national
The exception to the exemption in Section 234(a) is the
government, its agencies and instrumentalities.
only instance when the national government, its agencies
Section 133 of the Local Government Code starts with
and instrumentalities are subject to any kind of tax by local
the saving clause “[u]nless otherwise provided in this Code.”
governments. The exception to the exemption applies only
This means that unless the Local Government Code grants
to real estate tax and not to any other tax. The justification
an express authorization, local governments have no power
for the exception to the exemption is that the real property,
to tax the national government, its agencies and
although owned by the Republic, is not devoted to public
instrumentalities. Clearly, the rule is local governments
use or public service but devoted to the private gain of a
have no power to tax the national government, its agencies
taxable person.
and instrumentalities. As an exception to this rule, local
The minority also argues that since Section 133 precedes
governments may tax the national government, its
Sections 193 and 234 of the Local Government Code, the
agencies and instrumentalities only if the Local
later provisions prevail over Section 133. Thus, the
Government Code expressly so provides.
minority asserts:
638
42 Republic Act No. 8175, 29 December 1995.
43 Presidential Decree No. 252, 21 July 1973, as amended by
Presidential Decree No. 1071, 25 January 1977 and Executive Order No.
638 SUPREME COURT REPORTS ANNOTATED 1067, 25 November 1985.
Manila International Airport Authority vs. Court of
639
Appeals
VOL. 495, JULY 20, 2006 639 Manila International Airport Authority vs. Court of
Appeals
Manila International Airport Authority vs. Court of
Appeals
44
in the market place. Being essentially economic vehicles of
Philippine National Bank before it was reorganized as a the State for the common good—meaning for economic
stock corporation under the Corporation Code. All these development purposes—these government-owned or
government-owned corporations organized under special controlled corporations with special charters are usually
charters as stock corporations are subject to real estate tax organized as stock corporations just like ordinary private
on real properties owned by them. To rule that they are not corporations.
government-owned or controlled corporations because they In contrast, government instrumentalities vested with
are not registered with the Securities and Exchange corporate powers and performing governmental or public
Commission would remove them from the reach of Section functions need not meet the test of economic viability.
234 of the Local Government Code, thus exempting them These instrumentalities perform essential public services
from real estate tax. for the common good, services that every modern State
Third, the government-owned or controlled corporations must provide its citizens. These instrumentalities need not
created through special charters are those that meet the be economically viable since the government may even
two conditions prescribed in Section 16, Article XII of the subsidize their entire operations. These instrumentalities
Constitution. The first condition is that the government- are not the “government-owned or controlled corporations”
owned or controlled corporation must be established for the referred to in Section 16, Article XII of the 1987
common good. The second condition is that the government- Constitution.
owned or controlled corporation must meet the test of Thus, the Constitution imposes no limitation when the
economic viability. Section 16, Article XII of the 1987 legislature creates government instrumentalities vested
Constitution provides: with corporate powers but performing essential
governmental or public functions. Congress has plenary
SEC. 16. The Congress shall not, except by general law, provide authority to create government instrumentalities vested
for the formation, organization, or regulation of private with corporate powers provided these instrumentalities
corporations. Government-owned or controlled corporations perform essential government functions or public services.
may be created or established by special charters in the However, when the legislature creates through special
interest of the common good and subject to the test of charters corporations that perform economic or commercial
economic viability. (Emphasis and italics supplied) activities, such entities—known as “government-owned or
controlled corporations”—must meet the test of economic
The Constitution expressly authorizes the legislature to viability because they compete in the market place.
create “government-owned or controlled corporations” This is the situation of the Land Bank of the Philippines
through special charters only if these entities are required and the Development Bank of the Philippines and similar
to meet the twin conditions of common good and economic government-owned or controlled corporations, which derive
viability. In other words, Congress has no power to create their income to meet operating expenses solely from
government-owned or controlled corporations with special commercial transactions in competition with the private
charters unless they are made to comply with the two sector. The intent of the Constitution is to prevent the
conditions of common good and economic viability. The test creation of government-owned or controlled corporations
of economic viability applies only to government-owned or that cannot survive on their own in the market place and
controlled corporations that perform economic or thus merely drain the public coffers.
commercial activities and need to compete Commissioner Blas F. Ople, proponent of the test of
economic viability, explained to the Constitutional
_______________ Commission the purpose of this test, as follows:
44 Executive Order No. 80, 3 December 1986. 641
640
VOL. 495, JULY 20, 2006 641
4. The Department of Agriculture, to enforce The fact alone that MIAA is endowed with corporate
measures against the spread of plant and animal powers does not make MIAA a government-owned or
diseases into the country; controlled corporation. Without a change in its capital
5. The Aviation Security Command of the Philippine structure, MIAA remains a government instrumentality
National Police, to prevent the entry of terrorists under Section 2(10) of the Introductory Provisions of the
and the escape of criminals, as well as to secure the Administrative Code. More importantly, as long as MIAA
airport premises from terrorist attack or seizure; renders essential public services, it need not comply with
6. The Air Traffic Office of the Department of the test of economic viability. Thus, MIAA is outside the
Transportation and Communications, to authorize scope of the phrase “governmentowned or controlled
aircraft to enter or leave Philippine airspace, as corporations” under Section 16, Article XII of the 1987
well as to land on, or take off from, the airport; and Constitution.
The minority belittles the use in the Local Government
7. The MIAA, to provide the proper premises—such as
Code of the phrase “government-owned or controlled
runway and buildings—for the government
corporation” as merely “clarificatory or illustrative.” This is
personnel, passengers, and airlines, and to manage
fatal. The 1987 Constitution prescribes explicit conditions
the airport operations.
for the creation of “government-owned or controlled
corporations.” The Administrative Code defines what
All these agencies of government perform government
constitutes a “government-owned or controlled
functions essential to the operation of an international
corporation.” To belittle this phrase as “clarificatory or
airport.
illustrative” is grave error.
MIAA performs an essential public service that every
To summarize, MIAA is not a government-owned or
modern State must provide its citizens. MIAA derives its
controlled corporation under Section 2(13) of the
revenues principally from the mandatory fees and charges
Introductory Provisions of the Administrative Code because
MIAA imposes on passengers and airlines. The terminal
it is not organized as a stock or non-stock corporation.
fees that MIAA charges every passenger are regulatory or
Neither is MIAA a government-owned or controlled
47
645
VOL. 495, JULY 20, 2006 645 646 SUPREME COURT REPORTS ANNOTATED
Manila International Airport Authority vs. Court of Manila International Airport Authority vs. Court of
Appeals Appeals
Art. 420. The following things are property of public dominion: State,” which includes public airports and seaports, as
properties of public dominion and owned by the Republic.
(1) Those intended for public use, such as roads, canals, As properties of public dominion owned by the Republic,
rivers, torrents, ports and bridges constructed by the there is no doubt whatsoever that the Airport Lands and
State, banks, shores, roadsteads, and others of similar Buildings are expressly exempt from real estate tax under
character; Section 234(a) of the Local Government Code. This Court
(2) Those which belong to the State, without being for public has also repeatedly ruled that properties of public
use, and are intended for some public service or for dominion are not subject to execution or foreclosure sale.
the development of the national wealth. (Emphasis WHEREFORE, we GRANT the petition. We SET ASIDE
supplied) the assailed Resolutions of the Court of Appeals of 5
October 2001 and 27 September 2002 in CA-G.R. SP No.
The term “ports x x x constructed by the State” includes 66878. We DECLARE the Airport Lands and Buildings of
airports and seaports. The Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from
MIAA are intended for public use, and at the very least the real estate tax imposed by the City of Parañaque. We
intended for public service. Whether intended for public declare VOID all the real estate tax assessments, including
use or public service, the Airport Lands and Buildings are the final notices of real estate tax delinquencies, issued by
properties of public dominion. As properties of public the City of Parañaque on the Airport Lands and Buildings
dominion, the Airport Lands and Buildings are owned by of the Manila International Airport Authority, except for
the Republic and thus exempt from real estate tax under the portions that the Manila International Airport
Section 234(a) of the Local Government Code. Authority has leased to private parties. We also declare
VOID the assailed auction sale, and all its effects, of the
4. Conclusion Airport Lands and Buildings of the Manila International
Airport Authority.
Under Section 2(10) and (13) of the Introductory Provisions No costs.
of the Administrative Code, which governs the legal SO ORDERED.
relation and status of government units, agencies and
offices within the entire government machinery, MIAA is a Panganiban (C.J.), Puno, Quisumbing, Ynares-
government instrumentality and not a government-owned Santiago, Sandoval-Gutierrez, Corona, Carpio-Morales,
or controlled corporation. Under Section 133(o) of the Local Chico-Nazario, Garcia and Velasco, Jr., JJ., concur.
Government Code, MIAA as a government instrumentality Austria-Martinez, J., I agree with the separate
is not a taxable person because it is not subject to “[t]axes, opinion of J. Tin-ga.
fees or charges of any kind” by local governments. The only Callejo, Sr., J., I concur with the separate opinion of
exception is when MIAA leases its real property to a J. Tinga.
“taxable person” as provided in Section 234(a) of the Local Azcuna, J., On Leave.
Government Code, in which case the specific real property Tinga, J., Please see dissenting opinion.
leased becomes subject to real estate tax. Thus, only
portions of the Airport Lands and Buildings leased to 647
taxable persons like private parties are subject to real
estate tax by the City of Parañaque.
VOL. 495, JULY 20, 2006 647
Under Article 420 of the Civil Code, the Airport Lands
and Buildings of MIAA, being devoted to public use, are Manila International Airport Authority vs. Court of
properties of public dominion and thus owned by the State Appeals
or the Republic of the Philippines. Article 420 specifically
mentions “ports x x x constructed by the
646
648 SUPREME COURT REPORTS ANNOTATED
DISSENTING OPINION Manila International Airport Authority vs. Court of
Appeals
TINGA, J.:
International Airport Authority (MIAA) from liability for
The legally correct resolution of this petition would have real estate taxes, no clear-cut rule emerges on the
had the added benefit of an utterly fair and equitable result important question of the power of local government units
—a recognition of the constitutional and statutory power of (LGUs) to tax government corporations, instrumentalities
the City of Parañaque to impose real property taxes on the or agencies.
Manila International Airport Authority (MIAA), but at the The majority would overturn sub silencio, among others,
same time, upholding a statutory limitation that prevents at least one dozen precedents enumerated below:
the City of Parañaque from seizing and conducting an 1) Mactan-Cebu
2 International Airport Authority v. Hon.
execution sale over the real properties of MIAA. In the end, Marcos, the leading case penned in 1997 by recently
all that the City of Parañaque would hold over the MIAA is retired Chief Justice Davide, which held that the express
a limited lien, unenforceable as it is through the sale or withdrawal by the Local Government Code of previously
disposition of MIAA properties. Not only is this the legal granted exemptions from realty taxes applied to
effect of all the relevant constitutional and statutory instrumentalities and government-owned or controlled
provisions applied to this case, it also leaves the room for corporations (GOCCs) such as the Mactan-Cebu
negotiation for a mutually acceptable resolution between International Airport Authority (MCIAA). 3 The majority
the City of Parañaque and MIAA. invokes the ruling in Basco v. Pagcor, a precedent
Instead, with blind but measured rage, the majority discredited in Mactan, and a vanguard of a doctrine so
today veers wildly off-course, shattering statutes and noxious to the concept of local government rule that the
judicial precedents left and right in order to protect the Local Government Code was drafted precisely to counter
precious Ming vase that is the Manila International such philosophy. The efficacy of several rulings that
Airport Authority (MIAA). While the MIAA is left expressly 4 rely on Mactan, such as PHILRECA v. DILG 5
unscathed, it is surrounded by the wreckage that once was Secretary, City Government of San Pablo v. Hon. Reyes is
the constitutional policy, duly enacted into law, that was now put in question.
local autonomy. Make no mistake, the majority has 2) The rulings
6 in National Power Corporation v. City of
virtually declared war on the seventy nine (79) provinces, Cabanatuan, wherein the Court, through Justice Puno,
one hundred seventeen (117) cities, and one thousand five declared that the National Power Corporation, a GOCC, is
1
hundred (1,500) municipalities of the Philippines. liable for franchise taxes under the Local Government
The icing on this inedible cake is the strained and Code, and succeeding cases that have relied
7 on it such as
purposely vague rationale used to justify the majority Batangas Power Corp. v. Batangas City The majority now
opinion. Decisions of the Supreme Court are expected to states that deems instrumentalities as defined under the
provide clarity to the parties and to students of Administrative Code of 1987 as purportedly beyond the
jurisprudence, as to what the law of the case is, especially reach of any form of taxation by LGUs, stating “[l]ocal
when the doctrines of long standing are modified or governments are devoid of power to tax the national8
clarified. With all due respect, the decision in this case is government, its agencies and instrumen-talities.”
plainly so, so wrong on many levels. More egregious, in the Unfortunately, using the definition employed by the major-
majority’s resolve to spare the Manila
_______________
mandate of the Office of the Government Corporate The core issue in this case, whether the MIAA is liable to
Counsel extends only to GOCCs. the City of Parañaque for real property taxes under the
10) Two decisions promulgated by the Court just last Local Government Code, has already been decided by this
month (June21 2006), National Power Corporation v. Province
22
Court in the Mactan case, and should have been resolved
of Isabela and GSIS v. City Assessor of Iloilo City. In the by simply applying precedent.
former, the Court pronounced that “[a]lthough as a general
rule, LGUs cannot impose taxes, fees, or charges of any Mactan Explained
kind on the National Government, its agencies and A brief recall of the Mactan case is in order. The Mactan-
instrumentalities, this rule admits of an exception, i.e., Cebu International Airport Authority (MCIAA) claimed
when specific provisions of the LGC authorize the LGUs to that it was exempt from payment of real property taxes to
impose taxes, fees or charges on the aforementioned the City of Cebu, invoking the specific exemption granted
entities.” Yet the majority now rules that the exceptions in in Section 14 of its charter, Republic Act No. 6958, and its
the LGC no longer hold, since “local governments are status as an instrumentality
25 of the government performing
devoid of power to tax the national 23 government, its governmental functions. Particularly, MCIAA invoked
agencies and instrumentalities.” The ruling in the latter Section 133 of the Local Government Code, precisely the
case, which held the GSIS as liable for real property taxes, same provision utilized by the majority as the basis for
is now put in jeopardy by the majority’s ruling. MIAA’s exemption. Section 133 reads:
There are certainly many other precedents affected,
perhaps all previous jurisprudence regarding local Sec. 133. Common Limitations on the Taxing Powers of Local
government taxation vis-a-vis government entities, as well Government Units.—Unless otherwise provided herein, the
as any previous definitions of GOCCs, and previous exercise of the taxing powers of provinces, cities, municipalities,
distinctions between the exercise of governmental and and barangays shall not extend to the levy of the following:
proprietary functions24 (a distinction laid down by this Court xxx
as far back as 1916 ). What is the reason offered by the (o) Taxes, fees or charges of any kind on the National
majority for overturning or modifying all these precedents Government, its agencies and instrumentalities and local
and doctrines? None is given, for the majority takes comfort government units. (emphasis and italics supplied)
instead in the pretense that these precedents never existed.
Only children should be permitted to subscribe to the However, the Court in Mactan noted that Section 133
theory that something bad will go away if you pretend hard qualified the exemption of the National Government, its
enough that it does not exist. agencies and instrumentalities from local taxation with the
phrase “unless otherwise provided herein.” It then
_______________ considered the other relevant provisions of the Local
Government Code, particularly the following:
21 G.R. No. 165827, 16 June 2006, 491 SCRA 169.
22 G.R. No. 147192, 27 June 2006, 493 SCRA 169.
_______________
23 Supra note 8.
24 See Mendoza v. De Leon, 33 Phil. 508 (1916). 25 Mactan, supra note 2, at pp. 397-398; p. 675.
652 653
652 SUPREME COURT REPORTS ANNOTATED VOL. 495, JULY 20, 2006 653
Manila International Airport Authority vs. Court of Manila International Airport Authority vs. Court of
Appeals Appeals
SEC. 193. Withdrawal of Tax Exemption Privileges.—Unless 654 SUPREME COURT REPORTS ANNOTATED
otherwise provided in this Code, tax exemption or incentives
Manila International Airport Authority vs. Court of
granted to, or enjoyed by all persons, whether natural or Appeals
juridical, including government-owned and controlled
corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit
Clearly, Section 133 was not intended to be so absolute a
hospitals and educational institutions, are hereby withdrawn
prohibition on the power of LGUs to tax the National
26
_______________
32 Id., at pp. 63-65.
33 G.R. No. 88921, 31 May 1991, 197 SCRA 771.
29 Id., at pp. 411-413; pp. 685-687.
30 See City of Davao v. RTC, supra note 11, at p. 293. 658
31 Supra note 3.
662
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Manila International Airport Authority vs. Court of 662 SUPREME COURT REPORTS ANNOTATED
Appeals Manila International Airport Authority vs. Court of Appeals
In the38 2003 case of Philippine Ports Authority v. City of the LGUs to impose certain
41 taxes even on instrumentalities of the
Iloilo, the Court, in the able ponencia of Justice Azcuna, National Government.”
affirmed the levy of realty taxes on the PPA. Although the
taxes were assessed under the old Real Property Tax Code The taxability of the PPA recently came 42 to fore in
and not the Local Government Code, the Court again cited Philippine Ports Authority v. City of Iloilo case, a decision
Mactan to refute PPA’s invocation of Basco as the basis of also penned by Justice Callejo, Sr., wherein the Court
its exemption. affirmed the sale of PPA’s properties at public auction for
failure to pay realty taxes. The Court again reiterated that
[Basco] did not absolutely prohibit local governments from taxing “it was the intention of Congress to withdraw the tax
government instrumentalities. In fact we stated therein: exemptions granted to or presently enjoyed by all persons,
including government-owned or43 controlled corporations,
The power of local government to “impose taxes and fees” is always
upon the effectivity” of the Code. The Court in the second
subject to “limitations” which Congress may provide by law. Since P.D.
Public Ports Authority case likewise cited Mactan as
1869 remains an “operative” law until “amended, repealed or revoked”. . .
providing the “raison d’etre for the withdrawal of the
its “exemption clause” remains an exemption to the exercise of the power
exemption,” namely, “the State policy to ensure autonomy
of local governments to impose taxes and fees.
to local governments and the objective of the [Local
Furthermore, in the more recent case of Mactan Cebu Government Code] that they enjoy genuine and meaningful
International Airport Authority v. Marcos, where the Basco case local autonomy to enable them to attain 44 their fullest
was similarly invoked for tax exemption, we stated: “[N]othing development as self-reliant communities. . . .” 45
can prevent Congress from decreeing that even instrumentalities Last year, the Court, in City of Davao v. RTC, affirmed
or agencies of the Government performing governmental that the legislated exemption from real property taxes of
functions may be subject to tax. Where it is done precisely to the Government Service Insurance System (GSIS) was
fulfill a constitutional mandate and national policy, no one can removed under the Local Government Code. Again, Mactan
doubt its wisdom.” The fact that tax exemptions of government- was relied upon as the governing precedent. The removal of 46
owned or controlled corporations have been expressly withdrawn the tax exemption stood even though the then GSIS law
by the present Local Government Code clearly attests against prohibited the removal of GSIS’ tax exemptions unless the
petitioner’s claim of absolute exemption
39 of government exemption was specifically repealed, “and a provision is
instrumentalities from local taxation. enacted to substitute the declared policy of exemption from
any and all47 taxes as an essential factor for the solvency of in Mactan. Moreover, the parties in Mactan and in this
the fund.” The Court, citing established 48 doctrines in case are similarly situated, as can be obviously deducted
statutory construction and Duarte v. Dade ruled that such from the fact that both petitioners are airport authorities
proscription on future legislation operating under similarly worded charters. And the fact
that the majority cites doctrines contrapuntal to the Local
_______________ Government Code as in Basco and Maceda evinces an
intent to
41 Id.
42 G.R. No. 143214, 11 November 2004, 442 SCRA 175.
_______________
43 Id., at p. 184.
44 Id., at pp. 185-186, citing MIAA v. Marcos, supra note 2. 49 Id.
45 Supra note 11. 50 Supra note 22.
46 P.D. No. 1981. See City of Davao v. RTC, supra note 40, at p. 289. 51 Id.
47 Id., at pp. 287-288. 52 Decision, p. 6.
48 32 Phil. 36, 49; cited in City of Davao v. RTC, supra note 40 at pp.
664
296-297.
663
664 SUPREME COURT REPORTS ANNOTATED
Manila International Airport Authority vs. Court of
VOL. 495, JULY 20, 2006 663 Appeals
Manila International Airport Authority vs. Court of
Appeals go against the Court’s jurisprudential trend adopting the
philosophy of expanded local government rule under the
was itself prohibited, as “the legislature cannot 49 bind a Local Government Code.
future legislature to a particular mode of repeal.” Before I dwell upon the numerous flaws of the majority,
And most recently, just less than one month ago, the a brief comment is necessitated on the majority’s studied
Court, through Justice Corona in Government 50 Service murkiness vis-à-vis the Mactan precedent. The majority is
Insurance System v. City Assessor of Iloilo again affirmed obviously inconsistent with Mactan and there is no way
that the Local Government Code removed the previous these two rulings can stand together. Following basic
exemption from real property taxes of the GSIS. Again principles in statutory construction, Mactan will be deemed
Mactan was cited as having 51 “expressly withdrawn the [tax] as giving way to this new ruling.
exemption of the [GOCC]. However, the majority does not bother to explain why
Clearly then, Mactan is not a stray or unique precedent, Mactan is wrong. The interpretation in Mactan of the
but the basis of a jurisprudential rule employed by the relevant provisions of the Local Government Code is
Court since its adoption, the doctrine therein consistent elegant and rational, yet the majority refuses to explain
with the Local Government Code. Corollarily, Basco, the why this reasoning of the Court in Mactan is erroneous. In
polar opposite of Mactan has been emphatically rejected fact, the majority does not even engage Mactan in any
and declared inconsistent with the Local Government Code. meaningful way. If the majority believes that Mactan may
still stand despite this ruling, it remains silent as to the
viable distinctions between these two cases.
II. Majority, in Effectively Overturning Mactan, The majority’s silence on Mactan is baffling, considering
Refuses to Say Why Mactan Is Wrong how different this new ruling is with the ostensible
precedent. Perhaps the majority does not simply know how
The majority cites Basco in support. It does not cite
to dispense with the ruling in Mactan. If Mactan truly
Mactan, other than an incidental reference that it is relied
deserves to be discarded as precedent, it deserves a more
52
_______________ _______________
mortgage by the Authority nor to transfer to any entity other than the 58 This is apparent from such assertions as “When the law vests in a
National Government.” government instrumentality corporate powers, the instrumentality does
55 See Section 16, E.O. 903 (as amended) and Section 13, Rep. Act No. not become a corporation. Unless the government instrumentality is
6958. organized as a stock or non-stock corporation, it remains a government
56 See Articles 40 to 43, Civil Code. instrumentality exercising not only governmental but also corporate
57 See Articles 44 to 47, Civil Code. powers.” See Decision, p. 9-10.
59 Decision, p. 9.
667
668
669 670
VOL. 495, JULY 20, 2006 669 670 SUPREME COURT REPORTS ANNOTATED
Manila International Airport Authority vs. Court of Manila International Airport Authority vs. Court of
Appeals Appeals
Ordinarily, the inconsequential verbiage stewing in judicial down in the section entitled “General Terms Defined,”
opinions deserve little rebuttal. However, the entire which qualifies:
discussion of the majority on the definition of a GOCC,
Sec. 2. General Terms Defined.—Unless the specific words of
obiter as it may ultimately be, deserves emphatic
the text, or the context as a whole, or a particular statute,
refutation. The views of the majority on this matter
shall require a different meaning: (emphasis supplied)
are very dangerous, and would lead to absurdities,
xxx
perhaps unforeseen by the majority. For in fact, the
majority effectively declassifies many entities Similar in vein is Section 6 of the Corporation Code which
created and recognized as GOCCs and would give provides:
primacy to the Administrative Code of 1987 rather
than their respective charters as to the definition of SEC. 4. Corporations created by special laws or charters.—
these entities. Corporations created by special laws or charters shall be
governed primarily by the provisions of the special law or charter
Majority Ignores the Power of Congress to Legislate and creating them or applicable to them, supplemented by the
Define Chartered Corporations provisions of this Code, insofar as they are applicable. (emphasis
First, the majority declares that, citing Section 2(13) of the supplied)
Administrative Code, a GOCC must be “organized as a
stock or non-stock corporation,” as defined under the Thus, the clear doctrine emerges—the law that governs
Corporation Code. To insist on this as an absolute rule fails the definition of a corporation or entity created by
on bare theory. Congress has the undeniable power to Congress is its legislative charter. If the legislative
create a corporation by legislative charter, and has been enactment defines an entity as a corporation, then it
doing so throughout legislative history. There is no is a corporation, no matter if the Corporation Code
constitutional prohibition on Congress as to what structure or the Administrative Code seemingly provides
these chartered corporations should take on. Clearly, otherwise. In case of conflict between the legislative
Congress has the prerogative to create a corporation in charter of a government corporation, on one hand,
whatever form it chooses, and it is not bound by any and the Corporate Code and the Administrative
traditional format. Even if there is a definition of what a Code, on the other, the former always prevails.
returns from its capital investment, as well66 as excess
Majority, in Ignoring the Legislative Charters, Effectively revenues from its operation, for expansion.” Can the
Classifies Duly Established GOCCs, With Disastrous and holder of the shares of NPC, the National Government,
Far Reaching Legal Consequences receive its surplus profits on the basis of its shares held? It
Second, the majority claims that MIAA does not qualify cannot, according to the NPC charter, and hence, following
either as a stock or non-stock corporation, as defined under Section 3 of the Corporation Code, the NPC is not a stock
the Corporation Code. It explains that the MIAA is not a corporation, if the majority is to be believed.
stock corporation because it does not have any capital stock
divided into shares. Neither can it be considered as a non- _______________
stock corporation because it has no members, and under
Section 87, a non-stock corporation is one where no part of 64 See Sec. 5, Rep. Act No. 6395.
its 65 Section 3, Corporation Code.
66 See Section 13, Rep. Act No. 6395.
671
672
673
75 See Section 11, Pres. Decree No. 857.
674
VOL. 495, JULY 20, 2006 673
Manila International Airport Authority vs. Court of 674 SUPREME COURT REPORTS ANNOTATED
Appeals
Manila International Airport Authority vs. Court of
Appeals
ity, non-stock corporations are prohibited from declaring
76
any part of its income as dividends. But if Republic Act No.
2) Bases Conversion
77 Development Authority —has no
7656 requires even non-stock corporations to declare
capital stock, no members.
dividends from income, should it not follow that the 78
government-owned or controlled corporations? For if not, 4) Light Rail Transit Authority —no capital stock, no
and the majority’s illogic is pursued, Republic Act No. 7656, members. 82 83
passed in 1993, would be fatally flawed, as it would 5) Bangko Sentral ng Pilipinas —no capital stock, no
contravene the Administrative Code of 1987 and the members, required to remit fifty percent
84 (50%) of its
Corporation Code. net profits to the National Treasury.
85
In fact, the ruinous effects of the majority’s hypothesis 6) National Power Corporation —has capital stock
on the nature of GOCCs can be illustrated by Republic Act but is prohibited from “distributing to the holders of
No. 7656. Following the majority’s definition of a GOCC its shares dividends or allotments of the surplus
86
and in accordance with Republic Act No. 7656, here are but profits on the basis of the shares held;” no
a few entities which are not obliged to remit fifty (50%) of members.
its annual net earnings to the National Government as
7) Manila87 International 88Airport Authority—no capital
they are excluded from the scope of Republic Act No. 7656:
73 74
stock, no members, mandated to remit twenty
1) Philippine Ports Authority —has no capital stock, percent (20%) of its annual 89 gross operating income
no members, and obliged to apply the balance of its to the National Treasury.
income or revenue75 at the end of each year in a
general reserve. Thus, for the majority, the MIAA, among many others,
cannot be considered as within the coverage of Republic Act
No. 7656. Apparently, President Fidel V. Ramos disagreed.
_______________ How else then could Ex-
_______________ by the Manila International Airport Authority [MIAA] and
Phividec Industrial Authority [PIA] in the interest of
76 See Rep. Act No. 7227.
national economy and general welfare.
77 See Section 6, Rep. Act No. 7227. NOW, THEREFORE, I, FIDEL V. RAMOS, President of the
78 See Rep. Act No. 7916. Philippines, by virtue of the powers vested in me by law, do
79 See Section 47, Rep. Act No. 7916 in relation to Section 5, Pres. hereby order:
Decree No. 66. SECTION 1. The percentage of net earnings to be
80 See Executive Order No. 603, as amended. declared and remitted by the MIAA and PIA as dividends
81 See Article 6, Section 15 of Executive Order No. 603, as amended. to the National Government as provided for under Section
82 See Rep. Act No. 7653. If there is any doubt whether the BSP was 3 of Republic Act No. 7656 is adjusted from at least fifty
intended to be covered by Rep. Act No. 7656, see Section 2(b), Rep. Act No. percent [50%] to the rates specified hereunder:
7656, which states that “This term [GOCCs] shall also include financial
institutions, owned or controlled by the National Government, but shall 1. Manila International Airport Authority—35% [cash]
exclude acquired asset corporations, as defined in the next paragraphs, 2. Phividec Industrial Authority—25% [cash]
state universities, and colleges.”
83 See Section 2, Rep. Act No. 7653. SECTION 2. The adjusted dividend rates provided for under
84 See Sections 43 & 44, Rep. Act No. 7653. Section 1 are only applicable on 1997 net earnings of the
85 See Rep. Act No. 6395. concerned governmentowned and/or controlled corporations.
86 Supra note 35.
Obviously, it was the opinion of President Ramos and the
87 See Decision, p. 10.
Secretary of Finance that MIAA is a GOCC, for how else
88 Id., at pp. 10-11.
could it have come under the coverage of Republic Act No.
89 Id. 7656, a law applicable only to GOCCs? But, the majority
apparently disagrees, and resultantly holds that MIAA is
675
not obliged to remit even the reduced rate of
677
678 SUPREME COURT REPORTS ANNOTATED
VOL. 495, JULY 20, 2006 677 Manila International Airport Authority vs. Court of
Appeals
Manila International Airport Authority vs. Court of
Appeals
MIAA Is Without Doubt, A GOCC
reveal that they were established “to foster accelerated and
Following the charters of government corporations, there
balanced growth” of their respective regions, and towards
are two kinds of GOCCs, namely: GOCCs which are
such end, the charters commonly provide that “it is
stock corporations and GOCCs which are no stock
recognized that a government corporation should be
corporations (as distinguished from non-stock
created for the purpose,” and accordingly, these 95
corporation). Stock GOCCs are simply those which
charters “hereby created a body corporate.”
have capital stock while no stock GOCCs are those
However, these corporations do not have capital stock nor
which have no capital stock. Obviously these definitions
members, and are obliged to return the unexpended
are different from the definitions of the terms in the
balances of their appropriations and earnings to a
Corporation Code. Verily, GOCCs which are not
revolving fund in the National Treasury. The majority
incorporated with the Securities and Exchange
effectively declassifies these entities as GOCCs, never mind
Commission are not governed by the Corporation Code but
the fact that their very charters declare them to be GOCCs.
by their respective charters.
I mention these entities not to bring an element of
For the MIAA’s part, its charter is replete with
obscurantism into the fray. I cite them as examples
provisions that indubitably classify it as a GOCC. Observe
the following provisions from MIAA’s charter: (j) To exercise the power of eminent domain in the pursuit of
its purposes and objectives;
SECTION 3. Creation of the Manila International Airport
Authority.—There is hereby established a body corporate to xxx
be known as the Manila International Airport Authority
which shall be attached to the Ministry of Transportation and (o) To exercise all the powers of a corporation under
Communications. The principal office of the Authority shall be the Corporation Law, insofar as these powers are
located at the New Manila International Airport. The Authority not inconsistent with the provisions of this
may establish such offices, branches, agencies or subsidiaries as it Executive Order.
may deem proper and necessary; Provided, That any subsidiary
that may be organized shall have the prior approval of the xxx
President. SECTION 16. Borrowing Power.—The Authority may, after
The land where the Airport is presently located as well consultation with the Minister of Finance and with the
as the surrounding land area of approximately six approval of the President of the Philippines, as
hundred hectares, are hereby transferred, conveyed and recommended by the Minister of Transportation and
assigned to the ownership and administration of the Communications, raise funds, either from local or
Authority, subject to existing rights, if any. The Bureau of Lands international sources, by way of loans, credits or
and other appropriate government agencies shall undertake an securities, and other borrowing instruments, with the
actual survey of the area transferred within one year from the power to create pledges, mortgages and other voluntary
promulgation of this Executive Order and the corresponding liens or encumbrances on any of its assets or properties.
title to be issued in the name of the Authority. Any portion All loans contracted by the Authority under this Section,
thereof shall not be disposed through sale or through any other together with all interests and other sums payable in respect
mode unless specifically approved by the President of the thereof, shall constitute a charge upon all the revenues and assets
Philippines. of the Authority and shall rank equally with one another, but
xxx shall have priority over any other claim or charge on the revenue
SECTION 5. Functions, Powers, and Duties.—The Authority and assets of the Authority: Provided, That this provision shall
shall have the following functions, powers and duties: not be construed as a prohibition or restriction on the power of the
Authority to create pledges, mortgages, and other voluntary liens
679 or encumbrances on any assets or property of the Authority.
Except as expressly authorized by the President of the
Philippines the total outstanding indebtedness of the Authority in
VOL. 495, JULY 20, 2006 679
the principal amount, in
Manila International Airport Authority vs. Court of
Appeals 680
(d) To sue and be sued in its corporate name; Manila International Airport Authority vs. Court of Appeals
(e) To adopt and use a corporate seal;
local and foreign currency, shall not at any time exceed the net
(f) To succeed by its corporate name;
worth of the Authority at any given time.
(g) To adopt its by-laws, and to amend or repeal the xxx
same from time to time; The President or his duly authorized representative after
(h) To execute or enter into contracts of any kind or consultation with the Minister of Finance may guarantee, in the
nature; name and on behalf of the Republic of the Philippines, the
(i) To acquire, purchase, own, administer, lease, payment of the loans or other indebtedness of the Authority up to
mortgage, sell or otherwise dispose of any land, the amount herein authorized.
building, airport facility, or property of whatever
kind and nature, whether movable or immovable, or These cited provisions establish
96 the fitness of MIAA to be
any interest therein; the subject of legal relations. MIAA under its charter may
acquire and possess property, incur obligations, and bring
civil or criminal actions. It has the power to contract in its an instrumentality or an agency. The question of
own name, and to acquire title to real or personal property. whether MIAA is a GOCC might not even be
It likewise may exercise a panoply of corporate powers and determinative of this Petition, but the effect of the
possesses all the trappings of corporate personality, such as majority’s disquisition on that matter may even be
a corporate name, a corporate seal and by-laws. All these more destructive than the ruling that MIAA is
are contained in MIAA’s charter which, as conceded by the exempt from realty taxes. Is the majority ready to
Corporation Code and even the Administrative Code, is the live up to the momentous consequences of its flawed
primary law that governs the definition and organization of reasoning?
the MIAA.
In fact, MIAA itself believes that it is a GOCC Novel Proviso in 1987 Constitution Prescribing Standards
represents itself as such. It said so itself in the very in the Creation of GOCCs Necessarily Applies only to
first paragraph
97 of the present petition before this GOCCs Created After 1987.
Court. So does, apparently, the Department of Budget One last point on this matter on whether MIAA is a GOCC.
and Management, which classifies MIAA as a “government 98 The majority triumphantly points to Section 16, Article XII
owned & controlled corporation” on its internet website. of the 1987 Constitution, which mandates that the creation
There is also the matter of Executive Order No. 483, which of GOCCs through special charters be “in the interest of the
evinces the belief of the then-president of the Philippines common good and subject to the test of economic viability.”
that MIAA is a GOCC. And the Court before had similarly For the majority, the test of economic viability does not
characterized MIAA as a government-owned and controlled apply to government entities vested with corporate powers
corporation in the earlier and performing essential public services. But this test of
“economic viability” is new to the constitutional framework.
_______________ No such test was imposed in previous Constitutions,
including the 1973 Constitution which was the
96 See Art. 37, Civil Code, which provides in part, “Juridical capacity, fundamental law in force when the MIAA was
which is the fitness to be the subject of legal relations. . .”
97 See Rollo, p. 18. “Petitioner [MIAA] is a government-owned and
_______________
controlled corporation with original charter as it was created by
virtue of Executive Order No. 903 issued by then President Ferdinand E. 99 G.R. No. 104217, 5 December 1994, 238 SCRA 714; per Quiazon, J.,
Marcos on July 21, 1983, as amended by Executive Order No. 298 issued “Petitioner MIAA is a government-owned and controlled corporation for
by President Corazon C. Aquino on July 26, 1987, and with office address the purpose, among others, of encouraging and promoting international
at the MIAA Administration Bldg Complex, MIAA Road, Pasay City.” and domestic air traffic in the Philippines as a means of making the
(emphasis supplied). Philippines a center of international trade and tourism and accelerating
98 See “Department of Budget and Management—Web Linkages,” the development of the means of transportation and communications in
http://www.dbm. gov.ph/web_linkages.htm (Last visited 25 February the country.” Id., at p. 716.
2005).
682
681
instrumentalities are expressly defined as “an agency not in National Power Corporation, permits the imposition of
integrated within the department framework,” that view a franchise tax on businesses enjoying a franchise, even if
concluded that MIAA cannot be deemed an it be a GOCC such as NPC. And, as the Court
instrumentality. acknowledged in Mactan, Section 232 provides another
Still, that distinction is ultimately irrelevant. Of course, exception on the taxability of instrumentalities.
as stated earlier, 101the Administrative Code considers The majority abjectly refuses to engage Section 232 of
GOCCs as agencies, so the fact that MIAA is an agency the Local Government Code although it provides the
does not exclude it from classification as a GOCC. On the indubitable general rule that LGUs “may levy an annual
other hand, the majority justifies MIAA’s purported ad valorem tax on real property such as land, building,
exemption on Section 133 of the Local Government Code, machinery, and other improvements not hereafter
which similarly situates “agencies and instrumentalities” specifically exempted.” The specific exemptions are
as generally exempt from the taxation powers of LGUs. provided by Section104234. Section 232 comes sequentially
And on this point, the majority again evades Mactan and after Section 133(o), and
somehow concludes that Section 133 is the general rule,
notwithstanding Sections 232 and 234(a) of the Local _______________
Government Code. And the majority’s ultimate conclusion?
102 Supra note 8.
103 Supra note 6.
_______________
104 Assuming that there is conflict between Section 133(o), Section 193,
100 See Section 23, Chapter 6, Title XV, Book IV, Administrative Code of Section 232 and Section 234 of the Local Government Code, the rule in
1987. statutory construction is, “If there be no such ground for choice between
101 Supra note 60. inharmonious provisions or sections, the latter provision or section, being
the last expression of the legislative will, must, in construction, vacate the
683 former to the extent of the repugnancy. It has been held that in case of
irreconcilable conflict between two provisions of the same statute, the last
686
VOL. 495, JULY 20, 2006 685
Manila International Airport Authority vs. Court of Appeals
686 SUPREME COURT REPORTS ANNOTATED
the lower local government unit. Any fair and reasonable Manila International Airport Authority vs. Court of
doubt as to the existence of the power shall be interpreted Appeals
in favor of the local government unit concerned;
SEC. 129. Power to Create Sources of Revenue.—Each local Manila International Airport Authority vs. Court of
government unit shall exercise its power to create its own sources Appeals
of revenue and to levy taxes, fees, and charges subject to the
provisions herein, consistent with the basic policy of local fees and other charges pursuant to Article X, section 5 of the 1987
autonomy. Such taxes, fees, and charges shall accrue exclusively Constitution, viz.:
to the local government units.
“Section 5. Each Local Government unit shall have the power to create its
Justice Puno,106 in National Power Corporation v. City of own sources of revenue, to levy taxes, fees and charges subject to such
Cabanatuan, provides a more “sound and compelling guidelines and limitations as the Congress may provide, consistent with
policy considerations” that would warrant sustaining the the basic policy of local autonomy. Such taxes, fees and charges shall
taxability of governmentowned entities by local accrue exclusively to the Local Governments.”
government units under the Local Government Code.
This paradigm shift results from the realization that genuine
Doubtless, the power to tax is the most effective instrument to development can be achieved only by strengthening local
raise needed revenues to finance and support myriad activities of autonomy and promoting decentralization of governance. For a
the local government units for the delivery of basic services long time, the country’s highly centralized government structure
essential to the promotion of the general welfare and the has bred a culture of dependence among local government leaders
enhancement of peace, progress, and prosperity of the people. As upon the national leadership. It has also “dampened the spirit of
this Court observed in the Mactan case, “the original reasons for initiative, innovation and imaginative resilience in matters of
the withdrawal of tax exemption privileges granted to local development on the part of local government leaders.” 35
government-owned or controlled corporations and all other units The only way to shatter this culture of dependence is to give the
of government were that such privilege resulted in serious tax LGUs a wider role in the delivery of basic services, and confer
base erosion and distortions in the tax treatment of similarly them sufficient powers to generate their own sources for the
situated enterprises.” With the added burden of devolution, it is purpose. To achieve this goal, section 3 of Article X of the 1987
even more imperative for government entities to share in the Constitution mandates Congress to enact a local government code
requirements of development, fiscal
107 or otherwise, by paying taxes that will, consistent with the basic policy of local autonomy, set
or other charges due from them. the guidelines and limitations to this grant of taxing powers, viz.:
I dare not improve on Justice Puno’s exhaustive “Section 3. The Congress shall enact a local government code which shall
disquisition on the statutory and jurisprudential shift provide for a more responsive and accountable local government
brought about the acceptance of the principles of local structure instituted through a system of decentralization with effective
autonomy: mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities, and
“In recent years, the increasing social challenges of the times resources, and provide for the qualifications, election, appointment and
expanded the scope of state activity, and taxation has become a removal, term, salaries, powers and functions and duties of local officials,
tool to realize social justice and the equitable distribution of and all other matters relating to the organization and operation of the
wealth, economic progress and the protection of local industries as local units.”
well as public welfare and similar objectives. Taxation assumes
even greater significance with the ratification of the 1987 To recall, prior to the enactment of the Rep. Act No. 7160, also
Constitution. Thenceforth, the power to tax is no longer vested known as the Local Government Code of 1991 (LGC), various
exclusively on Congress; local legislative bodies are now given measures have been enacted to promote local autonomy. These
direct authority to levy taxes, include the Barrio Charter of 1959, the Local Autonomy Act of
1959, the Decentralization Act of 1967 and the Local Government
Code of 1983. Despite these initiatives, however, the shackles of
_______________
dependence on the national government remained. Local
106 Supra note 6. government units were faced with the same problems that
107 Id., at pp. 261-262. hamper their capabilities to participate effectively in the national
development efforts, among which are: (a) inadequate tax base,
687 (b) lack of fiscal control over external sources of income, (c) limited
authority to prioritize and approve development projects,
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(d) heavy dependence on external sources of income, and (e)
limited supervisory control over personnel of national line
agencies. these entities to share in the requirements of development, fiscal
Considered as the most revolutionary piece of legislation on or otherwise,
110 by paying the taxes and other charges due from
local autonomy, the LGC effectively deals with the fiscal them.”
constraints faced by LGUs. It widens the tax base of LGUs to
How does the majority counter these seemingly valid
include taxes which were prohibited by previous laws such as the
rationales which establish the soundness of a policy
imposition of taxes on forest products, forest concessionaires,
consideration subjecting national instrumentalities to local
mineral products, mining operations, and the like. The LGC
taxation? Again, by simply ignoring that these doctrines
likewise provides enough flexibility to impose tax rates in
exist. It is unfortunate if the majority deems these cases or
accordance with their needs and capabilities. It does not prescribe
the principles of devolution and local autonomy as simply
graduated fixed rates but merely specifies the minimum and
too inconvenient, and relies instead on discredited
maximum tax rates and leaves the 108 determination of the actual
precedents. Of course, if the majority faces the issues
rates to the respective sanggunian.
squarely, and expressly discusses why Basco was right and
And the Court’s ruling through Justice 109 Azcuna in Mactan was wrong, then this entire endeavor of the Court
Philippine Ports Authority v. City of Iloilo, provides would be more intellectually satisfying. But, this is not a
especially clear and emphatic rationale: game the majority wants to play.
“In closing, we reiterate that in taxing government-owned Mischaracterization of My Views on the Tax Exemption
or controlled corporations, the State ultimately suffers no Enjoyed by the National Government
loss. In National Power Corp. v. Presiding Judge, RTC, Br. XXV, Instead, the majority engages in an extended attack
38 we elucidated: pertaining to Section 193, mischaracterizing my views on
that provision as if I had been interpreting the provision as
Actually, the State has no reason to decry the taxation of NPC’s
making “the national government, which itself is a juridical
properties, as and by way of real property taxes. Real property
person, subject to tax by local governments since the
taxes, after all, form part and parcel of the financing apparatus
national government is not included
111 in the enumeration of
of the Government in development and nationbuilding,
exempt entities in Section 193.”
particularly in the local government level.
Nothing is farther from the truth. I have never advanced
xxx xxx xxx
any theory of the sort imputed in the majority. My main
To all intents and purposes, real property taxes are funds taken by the
thesis on the matter merely echoes the explicit provision of
State with one hand and given to the other. In no measure can the
Section 193 that unless otherwise provided in the Local
government be said to have lost anything.
Government Code (LGC) all tax exemptions enjoyed by all
Finally, we find it appropriate to restate that the primary persons, whether natural or juridical, including GOCCs,
reason for the withdrawal of tax exemption privileges granted to were withdrawn upon the effectivity of the Code. Since the
government-owned and controlled corporations and all other units provision speaks of withdrawal of tax exemptions of
of government was that such privilege resulted in serious tax base persons, it follows that the exemptions theretofore enjoyed
erosion and distortions in the tax treatment of similarly situated by MIAA which is definitely a person are deemed
enterprises, hence resulting in the need for withdrawn upon the advent of the Code.
_______________ _______________
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On the other hand, the provision does not address the Appeals
question of who are beyond the reach of the taxing power of
LGUs. In fine, the grant of tax exemption or the especially real estate taxes. Yet just in 2004, the Court
withdrawal thereof assumes that the person or entity unanimously held that the Lung Center was not exempt
involved is subject to tax. Thus, Section 193 does not apply from real property taxes. Can the majority and Lung
to entities which were never given any tax exemption. This Center be reconciled? I do not see how, and no attempt is
would include the national government and its political made to demonstrate otherwise.
subdivisions which, as a general
112 rule, are not subjected to Another key point. The last paragraph of Section 234
tax in the first place. Corollarily, the national specifically asserts that any previous exemptions from
government and its political subdivisions do not need tax realty taxes granted to or enjoyed by all persons, including
exemptions. And Section 193 which ordains the withdrawal all GOCCs, are thereby withdrawn. The majority’s
of tax exemptions is obviously irrelevant to them. interpretation of Sections 133 and 234(a) however
Section 193 is in point for the disposition of this case as necessarily implies that all instrumentalities, including
it forecloses dependence for the grant of tax exemption to GOCCs, can never be subjected to real property taxation
MIAA on Section 21 of its charter. Even the majority under the Code. If that is so, what then is the sense of the
should concede that the charter section is now ineffectual, last paragraph specifically withdrawing previous tax
as Section 193 withdraws the tax exemptions previously exemptions to all persons, including GOCCs when juridical
enjoyed by all juridical persons. persons such as MIAA are anyway, to his view, already
With Section 193 mandating the withdrawal of tax exempt from such taxes under Section 133? The majority’s
exemptions granted to all persons upon the effectivity of interpretation would effectively render the express and
the LGC, for MIAA to continue enjoying exemption from emphatic withdrawal of previous exemptions to GOCCs
realty tax, it will have to rely on a basis other than Section inutile. Ut magis valeat quam pereat. Hence, where a
21 of its charter. 113 statute is susceptible of more than one interpretation, the
Lung Center of the Philippines v. Quezon City provides court should adopt such reasonable and beneficial
another illustrative example of the jurisprudential havoc construction which will render the provision thereof
wrought about by the majority. Pursuant to its charter, the operative
115 and effective, as well as harmonious with each
Lung Center was organized as a trust administered
114 by an other.
eponymous GOCC organized with the SEC. There is no But, the majority seems content rendering as absurd the
doubt it is a GOCC, even by the majority’s reckoning. Local Government Code, since it does not have much use
Applying the Administrative Code, it is also considered as anyway for the Code’s general philosophy of fiscal
an agency, the term encompassing even GOCCs. Yet since autonomy, as evidently seen by the continued reliance on
the Administrative Code definition of “instrumentalities” Basco or Maceda. Local government rule has never been a
encompasses agencies, especially those not attached to a grant of emancipation from the national government. This
line department such as the Lung Center, it also follows is the favorite bugaboo of the opponents of local autonomy
that the Lung Center is an instrumentality, which for the —the fallacy that autonomy equates to independence.
majority is exempt from all local government taxes, Thus, the conclusion of the majority is that under
Section 133(o), MIAA as a government instrumentality is
_______________ beyond the reach of local taxation because it is not subject
to taxes, fees or charges of any kind. Moreover, the taxation
of national instrumentalities and agencies by MIAA Property Is Patrimonial And Not Part of Public
Dominion
_______________ The majority claims that the Airport Lands and Buildings
are property of public dominion as defined by the Civil
115 R. AGPALO, STATUTORY CONSTRUCTION (3rd ed., 1995), at p. Code, and therefore owned by the State or the Republic of
199; citing Javellana v. Tayo, G.R. No. 18919, 29 December 1982, 6 SCRA the Philippines. But as pointed out by Justice Azcuna in
1042 (1962); Radiola-Toshiba Phils., Inc. v. Intermediate Appellate Court, the first PPA case, if indeed a prop-
199 SCRA 373 (1991).
693
692
remarkable absurdity of an entity transferring property to corporation; hence, its patrimonial properties are subject to tax.”
itself.
Nothing in the Civil Code or the Constitution prohibits There is no doubt that the properties of the MIAA, as with
the State from transferring ownership over property of the PPA, are in a sense, for public use. A similar argument
public dominion to an entity that it similarly owns. It is was propounded by the Light Rail Transit Authority in
just like a family transferring ownership over the Light Rail118 Transit Authority v. Central Board of
properties its members own into a family corporation. The Assessment, which was cited in Philippine Ports Authority
family exercises effective control over the administration and deserves renewed emphasis. The Light
and disposition of these properties. Yet for several purposes
under the law, such as taxation, it is the corporation that is _______________
deemed to own
116 Philippine Ports Authority v. City of Iloilo, supra note 42.
694 117 Id., at pp. 186-187.
118 Supra note 15.
regard. The Court refuted the claim that the properties of valuable transportation facilities to the paying public.” It
the PPA were owned by the Republic of the Philippines, claimed that its carriage-ways and terminal stations are
noting that PPA’s charter expressly transferred ownership immovably attached to government-owned national roads,
over these properties to the PPA, a situation which and to impose real property taxes thereupon would be to
similarly obtains with MIAA. The Court even went as far impose taxes on public roads. This view did not persuade
as saying that the fact that the PPA “had not been issued the Court, whose decision was penned by Justice (now
any Torrens title over the port and port facilities and Chief Justice) Panganiban. It was noted:
appurtenances is of no legal consequence. A Torrens title
“Though the creation of the LRTA was impelled by public service
does not, by itself, vest ownership; it is merely an evidence
—to provide mass transportation to alleviate the traffic and
of title over properties. x x x It has never been recognized
116
transportation situation in Metro Manila—its operation
as a mode of acquiring ownership over real properties.”
undeniably partakes of ordinary business. Petitioner is clothed
The Court further added:
with corporate status and corporate powers in the furtherance of
“x x x The bare fact that the port and its facilities and its proprietary objectives. Indeed, it operates much like any
appurtenances are accessible to the general public does not private corporation engaged in the mass transport industry.
exempt it from the payment of real property taxes. It must be Given that it is engaged in a service-oriented commercial
stressed that the said port facilities and appurtenances are the endeavor, its carriageways and terminal stations are patrimonial
petitioner’s corporate patrimonial properties, not for public use, property subject to tax, notwithstanding its claim of being a
and that the operation of the port and its facilities and the government-owned or controlled corporation.
administration of its buildings are in the nature of ordinary xxx
business. The petitioner is clothed, under P.D. No. 857, with Petitioner argues that it merely operates and maintains the
corporate status and corporate powers in the furtherance of its LRT system, and that the actual users of the carriageways and
proprietary interests x x x The petitioner is even empowered to terminal stations are the commuting public. It adds that the
invest its funds in such government securities approved by the public use character of the LRT is not negated by the fact that
Board of Directors, and derives its income from rates, charges or revenue is obtained from the latter's operations.
fees for the use by vessels of the port premises, appliances or 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 MIAA is obligated to retain up to eighty percent (80%) of its
public service, and that the LRT carriageways and terminal gross operating income, not an inconsequential sum
stations are not exclusively for public use. Although petitioner is a assuming that the beneficial owner of MIAA’s properties is
public utility, it is nonetheless profit-earning. It actually uses actually the Republic, and not the MIAA.
those carriageways and terminal stations120 in its public utility Also, the claim that beneficial ownership over the MIAA
business and earns money therefrom. remains with the government and not MIAA is ultimately
xxx irrelevant. Section 234(a) of the Local Government Code
Even granting that the national government indeed owns the provides among those exempted from paying real property
carriageways and terminal stations, the exemption would not taxes are “[r]eal property owned by the [Republic]. . . except
apply because their121 beneficial use has been granted to petitioner, when the beneficial use thereof has been granted, for
a taxable entity.” consideration or otherwise, to a taxable person.” In the
context of Section 234(a), the identity of the beneficial
_______________ owner over the properties is not determinative as to
whether the exemption avails. It is the identity of the
119 Id., at p. 869. beneficial user of the property owned by the
120 Id., at p. 871.
697
121 Id., at p. 872.
696
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Manila International Airport Authority vs. Court of
Appeals Republic or its political subdivisions that is crucial, for if
said beneficial user is a taxable person, then the exemption
There is no substantial distinction between the properties does not lie.
held by the PPA, the LRTA, and the MIAA. These three I fear the majority confuses the notion of what might be
entities are in the business of operating facilities that construed as “beneficial ownership” of the Republic over
promote public transportation. the properties of MIAA as nothing more than what arises
The majority further asserts that MIAA’s properties, as a consequence of the fact that the capital
122 of MIAA is
being part of the public dominion, are outside the contributed by the National Government. If so, then there
commerce of man. But if this is so, then why does Section 3 is no difference between the State’s ownership rights over
of MIAA’s charter authorize the President of the MIAA properties than those of a majority stockholder over
Philippines to approve the sale of any of these properties? the properties of a corporation. Even if such shareholder
In fact, why does MIAA’s charter in the first place effectively owns the corporation and controls the
authorize the transfer of these airport properties, assuming disposition of its assets, the personality of the stockholder
that indeed these are beyond the commerce of man? remains separately distinct from that of the corporation. A
brief recall of the entrenched rule in corporate law is in
No Trust has been Created Over MIAA Properties For the order:
Benefit of the Republic
“The first consequence of the doctrine of legal entity regarding the
The majority posits that while MIAA might be holding title
separate identity of the corporation and its stockholders insofar as
over the Airport Lands and Buildings, it is holding it in
their obligations and liabilities are concerned, is spelled out in
trust for the Republic. A provision of the Administrative
this general rule deeply entrenched in American jurisprudence:
Code is cited, but said provision does not expressly provide
that the property is held in trust. Trusts are either express Unless the liability is expressly imposed by constitutional or statutory
or implied, and only those situations enumerated under the provisions, or by the charter, or by special agreement of the stockholders,
Civil Code would constitute an implied trust. MIAA does stockholders are not personally liable for debts of the corporation either
not fall within this enumeration, and neither is there a at law or equity. The reason is that the corporation is a legal entity or
provision in MIAA’s charter expressly stating that these artificial person, distinct from the members who compose it, in their
properties are being held in trust. In fact, under its charter, individual capacity; and when it contracts a debt, it is the debt of the
legal entity or artificial person—the corporation—and not the debt of the Nonetheless, Section 234(f) exempts properties owned by
individual members. (13A Fletcher Cyc. Corp. Sec. 6213) the Republic of the Philippines or its political subdivisions
from realty taxation. The obvious question is what
The entirely separate identity of the rights and remedies of a
comprises “the Republic of the Philippines.” I think the key
corporation itself and its individual stockholders have been given
to understanding the scope of “the Republic” is the phrase
definite recognition for a long time. Applying said principle, the
“political subdivisions.” Under the Constitution, political
Supreme Court declared that a corporation may not be made to
subdivisions are defined as “the provinces, cities,
answer for acts or liabilities of its stockholders or those of legal
municipali-
entities to which it may be connected, or vice versa. (Palay, Inc. v.
Clave, et al., 124 SCRA 638) It was likewise declared in a similar
_______________
case that a bonafide corporation should alone be liable for
corporate acts 123 R. LOPEZ, I THE CORPORATION CODE OF THE PHILIPPINES
ANNOTATED, pp. 15-16 (1994).
_______________ 124 See Section 5, E.O. No. 903.
698
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Certainly, if it was intended that the transfer should be society and are merely optional. An exhaustive discussion
free of consequence, then why was it effected to a body on the matter
127 was provided by the Court in Bacani v.
corporate, with a distinct legal personality from that of the NACOCO:
State or Republic? The stated aims of the MIAA could have
“x x x This institution, when referring to the national government,
very well been accomplished by creating an agency without
has reference to what our Constitution has established composed
independent juridical personality.
of three great departments, the legislative, executive, and the
judicial, through which the powers and functions of government
VI MIAA Performs Proprietary Functions are exercised. These functions are twofold: constituent and
ministrant. The former are those which constitute the very bonds (2) that a government should do these things which by its
of society and are compulsory in nature; the latter are those that very nature it is better equipped to administer for the
are undertaken only by way of advancing the general interests of public welfare than is any private individual or group of
society, and are merely optional. President Wilson enumerates individuals.” (Malcolm, The Government of the Philippine
the constituent functions as follows: Islands, pp. 19-20.)
From the above we may infer that, strictly
_______________ speaking, there are functions which our government
is required to exercise to promote its objectives as
125 See Section 1, Article X of the Constitution, which reads: “The expressed in our Constitution and which are
territorial and political subdivisions of the Republic of the Philippines are exercised by it as an attribute of sovereignty, and
the provinces, cities, municipalities and barangays x x x” those which it may exercise to promote merely the
126 Romualdez-Yap v. Civil Service Commission, G.R. No. 104226, 12 welfare, progress and prosperity of the people. To
August 1993, 225 SCRA 285, 294. this latter class belongs the organization of those
127 100 Phil. 468 (1956). corporations owned or controlled by the government
to promote certain aspects of the economic life of
700
our people such as the National Coconut Corporation.
These are what we call government-owned or controlled
700 SUPREME COURT REPORTS ANNOTATED corporations which may take on the form of a private
enterprise or one organized with powers and formal
Manila International Airport Authority vs. Court of
characteristics of128 a private corporations under the
Appeals
Corporation Law.
Manila International Airport Authority vs. Court of 129 Lopez, supra note 123 at p. 67.
Appeals
703
Aeronautics Administration (CAA), which had succeeded International Airport.” Notwithstanding this135 expansion,
the defunction National Airports Corporation. The CAA in the 1988 case of CAA v. Court of Appeals the Court
claimed that as an unincorporated agency of the Republic reaffirmed the ruling that the CAA136 was engaged in “private
of the Philippines, it was incapable of suing and being or non-governmental functions.” Thus, the Court had
sued. The Court noted: already ruled that the predecessor agency of MIAA, the
CAA was engaged in private or non-governmental
Among the general powers of the Civil Aeronautics functions. These are more precedents ignored by the
Administration are, under Section 3, to execute contracts of any majority. The following observation from the Teodoro case
kind, to purchase property, and to grant concession rights, and very well applies to MIAA.
under Section 4, to charge landing fees, royalties on sales to
aircraft of aviation gasoline, accessories and supplies, and rentals The Civil Aeronautics Administration comes under the
for the use of any property under its management. category of a private entity. Although not a body corporate
These provisions confer upon the Civil Aeronautics it was created, like the National Airports Corporation, not
Administration, in our opinion, the power to sue and be sued. The to maintain a necessary function of government, but to
power to sue and be sued is implied from the power to transact run what is essentially a business, even if revenues be not
private business. And if it has the power to sue and be sued on its its prime objective but rather the promotion of travel and
behalf, the Civil Aeronautics Administration with greater reason the convenience of the traveling public. It is engaged in an
should have the power to prosecute and defend suits for and enterprise which, far from being the exclusive prerogative
against the National Airports Corporation, having acquired all of state, may, more than the construction
137 of public roads,
the properties, funds and choses in action and assumed all the be undertaken by private concerns.
liabilities of the latter. To deny the National Airports
Corporation's creditors access to the courts of justice against the If the determinative point in distinguishing between
Civil Aeronautics Administration is to say that the government sovereign functions and proprietary functions is the vitality
could impair the obligation of its corporations by the 133 simple of the public service being performed, then it should be
expedient of converting them into unincorporated agencies. noted that there is no more important public service
performed than that engaged in by public utilities. But
notably, the Constitution itself authorizes private persons
_______________
to exercise these functions as 138
it allows them to operate
130 G.R. No. L-49930, 7 August 1985, 138 SCRA 63. public utilities in this country. If indeed such functions
131 “Did the State act in a sovereign capacity or in a corporate capacity are actually sovereign and belonging properly to the
when it organized the PNR for the purpose of engaging in transportation? government, shouldn’t it follow that the
Did it act differently when it organized the PNR as successor of the
Manila Railroad Company? x x x We hold that in the instant case the _______________
State divested itself of its sovereign capacity when it organized the PNR
134 Section 32(24), Rep. Act No. 776. See CAA v. Court of Appeals, supra
which is no different from its predecessor, the Manila Railroad Company.”
Id., at p. 66. note 18, at p. 36.
135 Supra note 18.
132 Supra note 17.
136 Id., at p. 36.
133 Id., at p. 206.
137 Teodoro v. National Airports Commission, supra note 17, at p. 207.
704 138 See Article XII, Section 11, CONST.
705
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xxx
Eventually, the charter of the CAA was revised, and it exercise of these tasks remain within the exclusive
among its expanded functions was “[t]o administer, preserve of the State?
There really139 is no prohibition against the government the resulting legal effect, subjecting on one hand the MIAA
taxing itself, and nothing obscene with allowing to local taxes but on the other hand shielding its properties
government entities exercising proprietary functions to be from any form of sale or disposition, is not contradictory or
taxed for the purpose of raising the coffers of LGUs. On the paradoxical, onerous as its effect may be on the LGU. It
other hand, it would be an even more noxious proposition simply means that the LGU has to find another way to
that the government or the instrumentalities that it owns collect the taxes due from MIAA, thus paving
141 the way for a
are above the law and may refuse to pay a validly imposed mutually acceptable negotiated solution.
tax. MIAA, or any similar entity engaged in the exercise of There are several other reasons this statutory limitation
proprietary, and not sovereign functions, cannot avoid the should be upheld and applied to this case. It is at this
adverse-effects of tax evasion simply on the claim that it is juncture that the importance of the Manila Airport to our
imbued with some of the attributes of government. national life and commerce may be accorded proper
consideration. The closure of the airport, even by reason of
MIAA’s legal omission to pay its taxes, will have an
VII. MIAA Property Not Subject to Execution Sale injurious effect to our national economy, which is ever
Without Consent of the President. reliant on air travel and traffic. The same effect would
Despite the fact that the City of Parañaque ineluctably has obtain if ownership and administration of the airport were
the power to impose real property taxes over the MIAA, to be transferred to an LGU or some other entity which
there is an equally relevant statutory limitation on this were not specifically chartered or tasked to perform such
power that must be fully upheld. Section 3 of the MIAA vital function. It is for this reason that the MIAA charter
charter states that “[a]ny portion [of the [lands transferred, specifically forbids the sale or disposition of MIAA
conveyed and assigned to the ownership and properties without the consent of the President. The
administration of the MIAA] shall not be disposed prohibition prevents the peremptory closure of the MIAA or
through sale or through any other mode unless the hampering of its operations on account of the demands
specifically 140approved by the President of the of its creditors. The airport is important enough to be
Philippines.” sheltered by legislation from ordinary legal processes.
Nothing in the Local Government Code, even with its Section 3 of the MIAA charter may also be appreciated
wide grant of powers to LGUs, can be deemed as repealing as within the proper exercise of executive control by the
this prohibition under Section 3, even if it effectively President over the MIAA, a GOCC which despite its
forecloses one possible remedy of the LGU in the collection separate legal personality, is still subsumed within the
of delinquent real property taxes. While the Local executive branch of government. The power of executive
Government Code withdrew all previous local tax control by the President should be upheld so long as such
exemptions of the MIAA and other natural and juridical exercise does not contravene the Constitution or the law,
persons, it did not similarly the Presi-
_______________
_______________
141 Indeed, last 4 February 2005, the MIAA filed a Manifestation before
139 Vitug & Acosta, supra note 112, at p. 35; citing Bisaya Land
this Court stating that its new General Manager had been conferring with
Transportation Co., Inc. v. Collector of Internal Revenue, L-11812, 29 May
the newly elected local government of Parañaque with the end of settling
1959, 105 Phil. 1338.
the case at mutually acceptable terms. See Rollo, pp. 315-316. While this
140 See Section 3, E.O. 903, as amended.
Manifestation was withdrawn a few weeks later, see Rollo, pp. 320-322, it
706 still stands as proof that the parties are nevertheless willing to explore an
extra-judicial settlement of this case.
My points may be summarized as follows: On the other hand, the majority’s flaws are summarized as
follows:
1) Mactan and a long line of succeeding cases have
already settled the rule that under the Local 1) The majority deliberately ignores all precedents
Government Code, enacted pursuant to the which run counter to its hypothesis, including
constitutional mandate of local autonomy, all Mactan. Instead, it relies and directly cites those
natural and juridical persons, even those GOCCs, doctrines and precedents which were overturned by
instrumentalities and agencies, are no longer Mactan. By imposing a different result than that
exempt from local taxes even if previously granted warranted by the precedents without explaining
an exemption. The only exemptions from local taxes why Mactan or the other precedents are wrong, the
are those specifically provided under the Local majority attempts to overturn all these ruling sub
Government Code itself, or those enacted through silencio and without legal justification, in a manner
subsequent legislation. that is not sanctioned by the practices and
traditions of this Court.
_______________ 2) The majority deliberately ignores the policy and
philosophy of local fiscal autonomy, as mandated by
142 See Section 17, Article VII, Constitution. “The President shall have the Constitution, enacted under the Local
control of all the executive departments. He shall ensure that the laws be Government Code, and affirmed by precedents.
faithfully executed.” Instead, the majority asserts that there is no sound
143 See note 141. rationale for local governments to tax national
708
government instrumentalities, despite the blunt
existence of such rationales in the Constitution, the
Local Government Code, and precedents.
708 SUPREME COURT REPORTS ANNOTATED
3) The majority, in a needless effort to justify itself, SECTION 125. Tax Exemptions.—The Bangko Sentral shall be
adopts an extremely strained exaltation of the exempt for a period of five (5) years from the approval of this
Administrative Code above and beyond the Act from all national, provincial, municipal and city taxes,
Corporation Code and the various legislative fees, charges and assessments.
charters, in order to impose a wholly absurd
definition of GOCCs that effectively The New Central Bank Act was promulgated after the
Local Government Code if the BSP is already
709 preternaturally exempt from local taxation owing to its
personality as a “government instrumentality,”
the power to purchase or acquire real properties. Note.—A local government unit (LGU), seeking relief in
However the PITAHC has no capital stock and no order to protect or vindicate an interest of its own, and of
members, thus following the majority, it is not a GOCC. the other LGUs, pertaining to their interest in their share
The state policy that guides PITAHC is the development
147 in the national taxes or the Internal Revenue Allotment
of traditional and alternative health care, and its (IRA), has the requisite standing to bring suit. (Province of
objectives include the promotion and advocacy of Batangas vs. Romulo, 429 SCRA 736 [2004])
alternative, preventive and curative health care modalities 148
that have been proven safe, effective and cost effective. ——o0o——
“Alternative health care modalities” include “other forms of
non-allophatic, occasionally non-indigenous or imported
healing methods” which include, among others “reflexology, 149