Manila International Airport Authority vs. City of Pasay

A government instrumentality vested with corporate powers but not organized as a stock or non-stock corporation is not a government-owned or controlled corporation and is exempt from local taxes; airport lands and buildings are properties of public dominion owned by the Republic and exempt from real property tax, unless their beneficial use is granted to a taxable person.

The Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex pursuant to Executive Order No. 903. Under Sections 3 and 22 of EO 903, approximately 600 hectares of land, including runways and buildings, were transferred to MIAA. The NAIA Complex straddles the border of Pasay City and Parañaque City. In August 2001, the City of Pasay issued Final Notices of Real Property Tax Delinquency to MIAA for taxable years 1992 to 2001, totaling over One Billion Pesos including penalties. The City Treasurer subsequently issued notices of levy and warrants of levy, and the City Mayor threatened to sell the properties at public auction if the delinquencies remained unpaid.

• Creation and Mandate of MIAA: Petitioner MIAA was created under Executive Order No. 903 to operate and administer the NAIA Complex. EO 903 transferred approximately 600 hectares of land, runways, and airport buildings to MIAA's ownership and administration.
• Tax Assessment and Levy: On August 28, 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001, amounting to a grand total of ₱1,016,213,836.33 including penalties. Prior to this, on August 24, 2001, the City Treasurer had issued notices of levy and warrants of levy. The City Mayor threatened a public auction sale if the taxes remained unpaid.
• Judicial Action: MIAA sought judicial relief from the Court of Appeals via a petition for prohibition and injunction, arguing its exemption from real property tax. The appellate court dismissed the petition, applying Sections 193 and 234 of the Local Government Code which withdrew tax exemptions previously enjoyed by government-owned or controlled corporations.

• Exemption as Government Instrumentality: Petitioner argued that it is a government instrumentality vested with corporate powers, not a government-owned or controlled corporation (GOCC), and is therefore exempt from local taxes under Section 133(o) of the Local Government Code.
• Public Dominion Character of Properties: Petitioner maintained that the airport lands and buildings are properties of public dominion intended for public use, owned by the Republic of the Philippines, and thus exempt from real property tax under Section 234(a) of the Local Government Code.

• Withdrawal of Tax Exemption: Respondent countered that under Sections 193 and 234 of the Local Government Code, tax exemptions previously granted to GOCCs were withdrawn upon the effectivity of the Code.
• MIAA as a GOCC: Respondent argued that MIAA is a GOCC, and thus its previous tax exemption under Section 21 of EO 903 was effectively withdrawn by the Local Government Code.

• Legal Status of MIAA: Whether MIAA is a government-owned or controlled corporation or a government instrumentality.
• Tax Exemption of Airport Properties: Whether the NAIA Pasay properties of MIAA are exempt from real property tax.

• Legal Status of MIAA: MIAA is a government instrumentality, not a GOCC. A GOCC must be organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares and no stockholders. Neither is it a non-stock corporation because it has no members, it remits 20% of its annual gross operating income to the National Treasury, and it is not organized for charitable, religious, educational, or similar purposes. As a government instrumentality vested with corporate powers, MIAA is exempt from any kind of tax by local governments under Section 133(o) of the Local Government Code.
• Tax Exemption of Airport Properties: The airport lands and buildings are exempt from real property tax. These properties are intended for public use and are thus properties of public dominion under Article 420 of the Civil Code, specifically analogous to "ports constructed by the State." As properties of public dominion, they are owned by the Republic and fall under the exemption for real property owned by the Republic under Section 234(a) of the Local Government Code. However, the exception to this exemption applies if the beneficial use of the property is granted to a taxable person. Accordingly, only those portions of the NAIA Pasay properties leased to private parties are subject to real property tax.

• Government Instrumentality vs. GOCC — A government instrumentality refers to any agency of the national government not integrated within the department framework, vested with special functions, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy usually through a charter. While the definition of instrumentality includes GOCCs, an instrumentality that is not organized as a stock or non-stock corporation does not qualify as a GOCC. The vesting of corporate powers in an instrumentality does not transform it into a corporation; it remains an instrumentality exercising both governmental and corporate powers.
• Properties of Public Dominion — Properties intended for public use, such as roads, ports, and bridges constructed by the State, are properties of public dominion owned by the Republic. The term "ports" includes airports. Airport lands and buildings are intended for public use and are thus properties of public dominion, outside the commerce of man, and exempt from real property tax under Section 234(a) of the Local Government Code, unless their beneficial use is granted to a taxable person.

• "When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers." — Defines the effect of vesting corporate powers on the legal status of a government instrumentality.
• "The term 'ports x x x constructed by the State' includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion." — Establishes the classification of airport properties as properties of public dominion analogous to ports.

• Manila International Airport Authority v. Court of Appeals (G.R. No. 155650, July 20, 2006) — Controlling precedent. The Court reaffirmed its ruling in the 2006 MIAA case (which involved Parañaque City) that MIAA is a government instrumentality and its airport properties are of public dominion, exempt from real property tax.
• Mactan Cebu International Airport Authority v. Marcos (330 Phil. 392 [1996]) — Distinguished/fine-tuned. In Mactan Cebu, the Court held that MCIAA could not seek refuge in Section 133(o) of the LGC but only in Section 234(a), and found the properties were absolutely conveyed to MCIAA, thus taxable. The present ruling clarifies that Mactan Cebu and MIAA complement each other: the key determinant is whether the property is owned by the Republic (exempt) or absolutely conveyed to a separate juridical entity (taxable).
• Philippine Fisheries Development Authority v. Court of Appeals (G.R. No. 150301, October 2, 2007) — Followed. Cited to support the principle that government instrumentalities are exempt from local taxes under Section 133(o) of the Local Government Code.

• Section 133(o), Republic Act No. 7160 (Local Government Code) — Prohibits local government units from levying taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, and local government units. Applied to exempt MIAA, as a government instrumentality, from local taxes.
• Section 234(a), Republic Act No. 7160 (Local Government Code) — Exempts from real property tax real property owned by the Republic of the Philippines or any of its political subdivisions, except when the beneficial use thereof has been granted to a taxable person. Applied to exempt the NAIA properties, as properties of public dominion owned by the Republic, while subjecting leased portions to tax.
• Article 420, Civil Code — Defines properties of public dominion as those intended for public use (like ports and bridges constructed by the State) or for some public service. Applied to classify airport lands and buildings as properties of public dominion analogous to "ports."
• Section 2(10) and (13), Introductory Provisions of the Administrative Code of 1987 — Define "instrumentality" and "government-owned or controlled corporation." Applied to determine that MIAA is an instrumentality and not a GOCC because it is not organized as a stock or non-stock corporation.

Reynato S. Puno (CJ), Leonardo A. Quisumbing, Ma. Alicia Austria-Martinez, Renato C. Corona, Conchita Carpio Morales, Minita V. Chico-Nazario, Presbitero J. Velasco Jr., Teresita J. Leonardo-De Castro, Arturo D. Brion, Diosdado M. Peralta.

Consuelo Ynares-Santiago and Antonio Eduardo B. Nachura concurred in the result but filed separate opinions: - Consuelo Ynares-Santiago: Concurred in the result but disagreed with the characterization of MIAA as a mere instrumentality rather than a GOCC. The focus should solely be on whether the properties are owned by the Republic under Section 234(a) of the LGC, as MIAA holds the properties as an agent of the Republic. - Antonio Eduardo B. Nachura: Concurred in the result, proposing a "simple, direct and painless approach." The dichotomy between GOCC and instrumentality is unnecessary; the determinant is ownership. Airport properties are of public dominion owned by the Republic, and MIAA is a mere agent, not a trustee, of the Republic.

• Dante O. Tinga — Partially dissented. Voted to partially grant the petition by issuing a writ of prohibition to enjoin the auction sale of the properties, but maintained that MIAA is liable for real property taxes. The characterization of MIAA as an instrumentality rather than a GOCC was erroneously rationalized; the omitted clause in Section 2(10) of the Administrative Code explicitly includes GOCCs as instrumentalities. Furthermore, the properties cannot be considered of public dominion outside the commerce of man because the MIAA charter authorizes their sale, lease, and mortgage. The proper rule is that of Mactan Cebu, where Section 234, a specific provision, qualifies Section 133, a general provision, making ownership by the Republic the sole basis for exemption.