Manila International Airport Authority vs. Court of Appeals, et al.

Government instrumentalities vested with corporate powers but not organized as stock or non-stock corporations are distinct from government-owned or controlled corporations (GOCCs) and are exempt from all forms of local taxation under Section 133(o) of the Local Government Code of 1991. Furthermore, real properties of public dominion, such as airports and ports constructed by the State for public use, are owned by the Republic of the Philippines and are exempt from real property taxes under Section 234(a) of the same Code, unless the beneficial use thereof has been granted for consideration to a taxable private person.

The case arises from the City of Parañaque's attempt to collect real property taxes on the NAIA Complex operated by MIAA. The dispute centers on whether the enactment of the Local Government Code of 1991 withdrew the tax exemption previously enjoyed by MIAA under its charter (Executive Order No. 903), and whether MIAA's status as a corporate entity created by special charter subjects it to local taxation. The case involves significant questions regarding the scope of local fiscal autonomy under the Constitution, the nature of properties of public dominion, and the distinction between government instrumentalities and GOCCs.

• MIAA operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903 (as amended), its charter, which transferred approximately 600 hectares of land (Airport Lands and Buildings) from the Bureau of Air Transportation to MIAA for administration and operation.
• Section 21 of the MIAA Charter specifically provides that MIAA is exempt from the payment of real estate tax, and Section 3 prohibits the sale or disposition of any portion of the land unless specifically approved by the President of the Philippines.
• On March 21, 1997, the Office of the Government Corporate Counsel issued Opinion No. 061 opining that the Local Government Code of 1991 withdrew MIAA's tax exemption, leading MIAA to negotiate and pay some taxes for the years 1992 to 1997.
• On June 28, 2001, the City of Parañaque issued Final Notices of Real Estate Tax Delinquency for taxable years 1992 to 2001 totaling P624,506,725.42, inclusive of penalties.
• On July 17, 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings and threatened to sell them at public auction.
• In January 2003, the City posted notices of auction sale at various barangay halls and in the Philippine Daily Inquirer, scheduling the public auction for February 7, 2003.
• On February 6, 2003, MIAA filed an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order with the Supreme Court to prevent the auction.
• MIAA admits holding title to the Airport Lands and Buildings in its name but asserts it holds them merely as a trustee or administrator for the Republic of the Philippines, which remains the real owner, and that the properties are devoted to public use for international and domestic air travel.

• MIAA is a government instrumentality under Section 2(10) of the Administrative Code of 1987, not a government-owned or controlled corporation (GOCC), because it is not organized as a stock or non-stock corporation; it has no capital stock divided into shares, no stockholders, and no members.
• As a government instrumentality, MIAA is exempt from all forms of local taxation under Section 133(o) of the Local Government Code of 1991, which prohibits local governments from imposing taxes, fees, or charges on the National Government, its agencies and instrumentalities.
• The Airport Lands and Buildings are properties of public dominion under Article 420 of the Civil Code, being "ports constructed by the State" intended for public use, and therefore owned by the Republic of the Philippines, making them exempt from real property tax under Section 234(a) of the Local Government Code.
• MIAA is merely a trustee or administrator of the properties for the Republic, not the beneficial owner, and the prohibition on sale without Presidential approval under Section 3 of its Charter confirms that the Republic retains ownership and the properties are inalienable.
• Section 21 of the MIAA Charter provides a specific exemption from real estate tax, which was not withdrawn by the Local Government Code because Section 133(o) expressly preserves the immunity of instrumentalities from local taxation.
• The principle that "the government cannot tax itself" applies because imposing taxes on MIAA would merely transfer funds from one government pocket to another without any public advantage.

• Section 193 of the Local Government Code expressly withdrew all tax exemption privileges previously granted to "all persons, whether natural or juridical, including government-owned or controlled corporations," effective upon the Code's effectivity in 1992, and MIAA is a juridical person subject to this withdrawal.
• MIAA is a GOCC because its charter creates a body corporate with corporate powers, and it performs proprietary functions (operating an airport for profit through fees and charges), making its properties patrimonial, not of public dominion.
• The deletion of the phrase "any government-owned or controlled corporation so exempt by its charter" from Section 234(e) of the LGC (previously found in the 1974 Real Property Tax Code) evidences legislative intent to withdraw charter-based tax exemptions for GOCCs.
• The Supreme Court's ruling in Mactan International Airport v. Marcos held that the Local Government Code withdrew the exemption from real estate tax for international airport authorities similarly situated to MIAA.
• MIAA is estopped from claiming exemption because it voluntarily paid some real estate tax assessments for 1992-1997, acknowledging its tax liability.
• The power to tax is plenary and should be strictly construed against the taxpayer claiming exemption, especially under the constitutional policy of local autonomy.

• Procedural Issues: Whether the petition for review was filed within the reglementary period, considering the Court of Appeals dismissed the original petition for prohibition on the ground that it was filed beyond the 60-day period under Section 4, Rule 65 of the Rules of Civil Procedure.
• Substantive Issues: Whether the Airport Lands and Buildings of MIAA are exempt from real estate tax imposed by the City of Parañaque, specifically: (a) whether MIAA is a government instrumentality or a GOCC under the Administrative Code of 1987 and the Local Government Code of 1991; and (b) whether the properties are of public dominion owned by the Republic or patrimonial property of MIAA subject to taxation.

• Procedural: The Supreme Court granted the petition and set aside the Resolutions of the Court of Appeals dated October 5, 2001 and September 27, 2002, ruling that the procedural dismissal was overcome by the necessity of preventing the sale of public properties devoted to essential government services and the overarching requirement of substantial justice.
• Substantive: The Airport Lands and Buildings are exempt from real estate tax. First, MIAA is a government instrumentality under Section 2(10) of the Administrative Code of 1987, not a GOCC under Section 2(13), because it lacks capital stock divided into shares (essential for a stock corporation) and has no members (essential for a non-stock corporation); as an instrumentality, it is exempt from local taxation under Section 133(o) of the Local Government Code. Second, the properties are of public dominion under Article 420 of the Civil Code, being "ports" (including airports) constructed by the State for public use, owned by the Republic of the Philippines, and thus exempt under Section 234(a) of the Local Government Code; MIAA holds title merely as administrator/trustee. The exception under Section 234(a) (beneficial use granted to a taxable person) does not apply because MIAA, as a government instrumentality, is not a "taxable person" under the Code. Only portions of the Airport Lands and Buildings that MIAA has leased to private parties are subject to real estate tax.

• Distinction Between Government Instrumentality and GOCC — Under Section 2(10) and (13) of the Administrative Code of 1987, a government-owned or controlled corporation must be organized as a stock or non-stock corporation, while an instrumentality is an agency not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter; this classification determines liability for local taxation under the Local Government Code.
• Properties of Public Dominion — Under Article 420 of the Civil Code, properties intended for public use, such as roads, canals, rivers, ports (including airports and seaports) and bridges constructed by the State, are of public dominion, owned by the State or Republic of the Philippines, inalienable without Presidential approval, outside the commerce of man, and exempt from execution, foreclosure, and taxation.
• Inter-Governmental Tax Immunity — Local government units are prohibited from imposing taxes on the National Government, its agencies, and instrumentalities under Section 133(o) of the Local Government Code, based on the principle that such taxation serves no public purpose and merely transfers funds between government entities unless a sound and compelling policy requires such transfer.
• Liberal Construction of Tax Exemptions for Government Entities — Tax exemptions granted to government agencies are construed liberally in favor of the government, unlike exemptions for private taxpayers which are construed strictly against the claimant, because the practical effect is merely to reduce the amount of money that has to be handled by government in the course of its operations.

• "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."
• "Local governments are devoid of power to tax the national government, its agencies and instrumentalities."
• "The term 'ports' includes seaports and airports."
• "There is no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another."
• "Make no mistake, the majority has virtually declared war on the seventy nine (79) provinces, one hundred seventeen (117) cities, and one thousand five hundred (1,500) municipalities of the Philippines." — Justice Dante O. Tinga, Dissenting Opinion

• Maceda v. Macaraig, Jr. — Cited for the principle that tax exemptions running to the benefit of the government itself or its agencies are construed liberally, in favor of non-tax liability of such agencies, because the practical effect is merely to reduce administrative handling of government funds.
• Basco v. Philippine Amusements and Gaming Corporation — Cited for the doctrine that local governments have no power to tax instrumentalities of the National Government and that the power to tax (the power to destroy) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.
• Mactan-Cebu International Airport Authority v. Marcos — Discussed extensively as the contrary precedent which held that the Local Government Code withdrew tax exemptions for airport authorities; the majority distinguishes this by finding MIAA is an instrumentality, not a GOCC, effectively overruling the taxability aspect of Mactan.
• Municipality of Cavite v. Rojas — Cited for the doctrine that properties devoted to public use are outside the commerce of man and cannot be leased or sold by the municipality.
• Lung Center of the Philippines v. Quezon City — Cited for the ruling that portions of property owned by the Republic but leased to private entities are subject to real estate tax under the exception in Section 234(a) of the Local Government Code.
• Chavez v. Public Estates Authority — Cited regarding the President's power to reserve and withdraw lands of the public domain from public use under Commonwealth Act No. 141 and the Administrative Code.

• Section 133(o) of the Local Government Code of 1991 (Republic Act No. 7160) — Prohibits local government units from imposing taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities.
• Section 193 of the Local Government Code of 1991 — Withdraws tax exemption privileges granted to all persons, whether natural or juridical, including GOCCs, unless otherwise provided in the Code, qualified by the saving clause referring to Section 133(o).
• Section 232 of the Local Government Code of 1991 — Grants local government units the power to levy an annual ad valorem tax on real property not specifically exempted.
• Section 234(a) of the Local Government Code of 1991 — Exempts real property owned by the Republic of the Philippines or any of its political subdivisions from real property tax, except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
• Section 2(10) and Section 2(13) of the Administrative Code of 1987 (Executive Order No. 292) — Define "instrumentality" and "government-owned or controlled corporation," respectively, serving as the statutory basis for distinguishing MIAA's status and determining that it is not a GOCC.
• Article X, Section 5 of the 1987 Constitution — Grants local government units the power to create their own sources of revenue and levy taxes, fees, and charges subject to such guidelines and limitations as Congress may provide, consistent with the basic policy of local autonomy.
• Articles 419-422 of the Civil Code — Classify property as either of public dominion (intended for public use or public service) or private ownership, determining that properties like ports constructed by the State are owned by the Republic, inalienable, and not subject to levy or auction sale.
• Section 21 of Executive Order No. 903 (MIAA Charter) — Specifically exempts MIAA from the payment of real estate tax.

• Justice Dante O. Tinga — Argued that MIAA is a GOCC, not merely an instrumentality, because its charter creates a body corporate with all powers of a corporation under the Corporation Law; contended that Section 193 of the Local Government Code withdrew all tax exemptions for GOCCs and that the majority's ruling undermines the constitutional policy of local autonomy by exempting instrumentalities from taxation, effectively overruled Mactan-Cebu International Airport Authority v. Marcos sub silencio; suggested that while the tax is validly imposed, the auction sale should be void due to Section 3 of the MIAA Charter requiring Presidential approval for any sale or disposition of properties.