602 Phil. 160
CARPIO, J.:
TAX DECLARATION | TAXABLE YEAR | TAX DUE | PENALTY | TOTAL | |
A7-183-08346 | 1997-2001 | 243,522,855.00 | 123,351,728.18 | 366,874,583.18 | |
A7-183-05224 | 1992-2001 | 113,582,466.00 | 71,159,414.98 | 184,741,880.98 | |
A7-191-00843 | 1992-2001 | 54,454,800.00 | 34,115,932.20 | 88,570,732.20 | |
A7-191-00140 | 1992-2001 | 1,632,960.00 | 1,023,049.44 | 2,656,009.44 | |
A7-191-00139 | 1992-2001 | 6,068,448.00 | 3,801,882.85 | 9,870,330.85 | |
A7-183-05409 | 1992-2001 | 59,129,520.00 | 37,044,644.28 | 96,174,164.28 | |
A7-183-05410 | 1992-2001 | 20,619,720.00 | 12,918,254.58 | 33,537,974.58 | |
A7-183-05413 | 1992-2001 | 7,908,240.00 | 4,954,512.36 | 12,862,752.36 | |
A7-183-05412 | 1992-2001 | 18,441,981.20 | 11,553,901.13 | 29,995,882.33 | |
A7-183-05411 | 1992-2001 | 109,946,736.00 | 68,881,630.13 | 178,828,366.13 | |
A7-183-05245 | 1992-2001 | 7,440,000.00 | 4,661,160.00 | 12,101,160.00 | |
GRAND TOTAL | P642,747,726.20 | P373,466,110.13 | P1,016,213,836.33 |
SECTION 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.The Court of Appeals held that as a government-owned corporation, MIAA's tax exemption under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992.
SECTION 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environment protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.
To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes x x x government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a "government-owned or controlled corporation." Obviously, the term government "instrumentality" is broader than the term "government-owned or controlled corporation." Section 2(10) provides:
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:Art. 420. The following things are property of public dominion: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. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.[7] (Emphasis in the original)
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
SEC. 2. General Terms Defined.- x x xThe term "government-owned or controlled corporation" has a separate definition under Section 2(13)[8] of the Introductory Provisions of the Administrative Code of 1987:
(10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.
SEC. 2. General Terms Defined.- x x xThe fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation."
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.
A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. x x xThus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.[10] Under Section 133(o)[11] of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties.
Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
x x x
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. x x x
When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."[9]
SEC. 2. General Terms Defined.- x x x[9] Supra note 6 at 615-618.
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.
SECTION 133. Common Limitations on the Taxing Powers of the Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:[12] Manila International Airport Authority v. Court of Appeals, supra note 6.
x x x
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.
Art. 420: The following things are property of public dominion:Concededly, the Court ruled in Mactan Cebu International Airport Authority v. Marcos[6] that:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
There is no question that the airport and all its installations, facilities and equipment, are intended for public use and are, thus, properties of public dominion.
The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the Republic of the Philippines whose beneficial use has been granted to the petitioner, and (b) whether the petitioner is a "taxable persons."Meanwhile, Executive Order No. 903[7] or the Revised Charter of the Manila International Airport Authority, provides in Section 3 thereof that -
Section 15 of [MCIAA's] Charter provides:Sec. 15. Transfer of Existing Facilities and Intangible Assets. - Al existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation, aerodome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, that the operations control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach control office, and the area control center shall be retained by the Air Transportation Office. No equipment, however, shall be removed by the Air Transportation Office from Mactan without the concurrence of the Authority. The Authority may assist in the maintenance of the Air Transportation Office equipment.The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International Airport in the Province of Cebu," which belonged to the Republic of the Philippines, then under the Air Transportation Office (ATO).
It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands" among other thins, to the petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines.
This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner's authorized capital stock consists of, inter alia, "the value of such real estate owned and/or administered by the airports." Hence, the petitioner is now the owner of the land in question and the exception in Section 234© of the LGC is inapplicable.
x x x xRegardless of the apparent transfer of title of the said properties to MIAA, I submit that the latter is only holding the properties for the benefit of the Republic in its capacity as agent thereof. It is to be noted that despite the conveyance of the title to the said properties to the MIAA, however, the latter could not in any way dispose of the same through sale or through any other mode unless specifically approved by the President of the Republic.[8] Even MIAA's borrowing power is dictated upon by the President. Thus, MIAA could raise funds, either from local or international sources, by way of loans, credits or securities, and other borrowing instruments, create pledges, mortgages and other voluntary lines or encumbrances on any of its assets or properties, only after consultation with the Secretary of Finance and with the approval of the President. In addition, MIAA's total outstanding indebtedness could exceed its net worth only upon express authorization by the President. [9]
The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines.
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units.-- Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:How was the Parañaque case able to define the MIAA as a instrumentality of the National Government? The case propounded that MIAA was not a GOCC:x x x15. Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (emphasis and underscoring supplied).
There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:This "black or white" categorization of "stock" and "non-stock" corporations utterly disregards the fact that nothing in the Constitution prevents Congress from creating government owned or controlled corporations in whatever structure it deems necessary. Note that this definitions of "stock" and "non-stock" corporations are taken from the Administrative Code, and not the Constitution. The Administrative Code is a statute, and is thus not superior in hierarchy to any other subsequent statute created by Congress, including the charters for GOCCs.SEC. 2. General Terms Defined. -- . . .A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares.
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: . . . . (Emphasis supplied)xxx
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code 10 defines a stock corporation as one whose "capital stock is divided into shares and . . . authorized to distribute to the holders of such shares dividends . . . ." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. 11 This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.[2]
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?Unfortunately, this cited statutory definition of an "instrumentality" is incomplete. Worse, the omitted portion from Section 2(10) completely contradicts the premise of the ponentethat an instrumentality is mutually exclusive from a GOCC. For the provision reads in full, with the omitted portion highlighted, thus:
MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows:SEC. 2. General Terms Defined. -- . . .When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."[3]
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. . . . (Emphasis supplied)
(10)Instrumentalityrefers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter.This term includes regulatory agencies, chartered institutions and government--owned or controlled corporations.This previous omission had not escaped the attention of the outside world. For example, lawyer Gregorio Batiller, Jr., has written a paper on the Parañaque case entitled "A Tale of Two Airports," which is published on the Internet.[4] He notes therein:
Also ofinterest was the dissenting opinion of Justice Dante Tinga to the effect that themajority opinion failed to quote in full the definition of "governmentinstrumentality:"The Office of the President itself was alarmed by the redefinition made by the MIAA caseof instrumentalities, causing it on 29 December 2006 to issue Executive Order No. 596 creating the unwieldy category of "Government Instrumentality Vested with Corporate Powers or Government Corporate Entities" just so that it was clear that these newly defined "instrumentalities" or "government corporate entities" still fell within the jurisdiction of the Office of the Government Corporate Counsel. The E.O. reads in part:The Majority gives the impression that a governmentinstrumentality is a distinct concept from a government corporation.Most tellingly, the majority selectively cites a portion of Section 2(10) ofthe Administrative Code of 1987, as follows:So the majority opinion effectively begged the question in finding that the MIAA was not a GOCC but a mere government instrumentality, which is other than a GOCC.[5]Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. xxx (emphasis omitted)"However, Section 2(10) of the Administrative Code, when read in full, makes an important clarification which the majority does not show. The portions omitted by the majority are highlighted below: xxx"(10)Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by, law endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government - owned or controlled corporations.
Reading this Executive Order, one cannot help but get the impression that the Republic of the Philippines, ostensibly the victorious party in the Parañaque case, felt that the 2006 ponenciaredefining "instrumentalities" was wrong. Ostensibly, the Office of the Government Corporate Counsel, the winning counsel in the MIAA case, cooperated in the drafting of this E.O. and probably also felt that the redefinition of "instrumentalities" was wrong. I had pointed out in my Dissent to the MIAA case that under the framework propounded in that case, GOCCs such as the Philippine Ports Authority, the Bases Conversion Development Authority, the Philippine Economic Zone Authority, the Light Rail Transit Authority, the Bangko Sentral ng Pilipinas, the National Power Corporation, the Lung Center of the Philippines, and even the Philippine Institute of Traditional and Alternative Health Care have been reclassified as instrumentalities instead of GOCCs.EXECUTIVE ORDER NO. 596
DEFINING AND INCLUDING "GOVERNMENT INSTRUMENTRALITY VESTED WITH CORPORATE POWERS" OR "GOVERNMENT CORPORATE ENTITIES" UNDER THE JURISDICTION OF THE OFFICE OF THE GOVERNMENT CORPORATE COUNSEL (OGCC) AS PRINCIPAL LAW OFFICE OF GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCs) AND FOR OTHER PURPOSES.
WHEREAS, the Office of the Government Corporate Counsel (OGCC), as the principal law office of all Government-Owned or Controlled Corporations (GOCCs), including their subsidiaries, other corporate offsprings and government acquired assets corporations, plays a very significant role in safeguarding the legal interests and providing the legal requirements of all GOCCs;
WHEREAS, there is an imperative need to integrate, strengthen and rationalize the powers and jurisdiction of the OGCC in the light of the Decision of the Supreme Court dated July 20, 2006, in the case of "Manila International Airport Authority vs. Court of Appeals, City of Parañaque, et al" (G.R. No. 155650), where the High Court differentiated "government corporate entities" and government instrumentalities with corporate powers" from GOCCs for purposes of the provisions of the Local Government Code on real estate taxes, and other fees and charges imposed by local government units;
WHEREAS, in the interest of an effective administration of justice, the application and definition of the term "GOCCs" need to be further clarified and rationalized to have consistency in referring to the term and to avoid unintended conflicts and/or confusion'
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in my by law, do hereby order:
SECTION 1. The Office of the Government Corporate Counsel (OGCC) shall be the principal law office of all GOCCs, except as may otherwise be provided by their respective charter or authorized by the President, their subsidiaries, corporate offsprings, and government acquired asset corporations. The OGCC shall likewise be the principal law of the "government instrumentality vested with corporate powers" or "government corporate entity," as defined by the Supreme Court in the case of "MIAA v. Court of Appeals, City of Parañaque, et al.," supra, notable examples of which are: Manila International Airport Authority (MIAA), Mactan International Airport Authority, the Philippine Ports Authority (PPA), Philippine Deposit Insurance Corporation (PDIC), Metropolitan Water and Sewerage Services (MWSS), Philippine Rice Research Institute (PRRI), Laguna Lake Development Authority (LLDA), Fisheries Development Authority (FDA), Bases Conversion Development Authority (BCDA), Cebu Port Authority (CPA), Cagayan de Oro Port Authority, and San Fernando Port Authority.
SECTION 2. As provided under PD 2029, series of 1986, the term GOCCs is defined as a stock or non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law, is owned or controlled by the government directly, or indirectly, through a parent corporation or subsidiary corporation, to the extent of at least majority of its outstanding capital stock or of its outstanding voting capital stock.
Under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987, a government "instrumentality" refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some, if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter.
SECTION 3. The following corporations are considered GOCCs under the conditions and/or circumstances indicated:
a) A corporation organized under the general corporation law under private ownership at least a majority of the shares of stock of which were conveyed to a government financial institution, whether by foreclosure or otherwise, or a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific assets acquired by a government financial institution in satisfaction of debts incurred therewith and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time, shall not be considered a GOCC before such disposition and even if the ownership or control thereof is subsequently transferred to another GOCC;
b) A corporation created by special law which is explicitly intended under that law for ultimate transfer to private ownership under certain specified conditions shall be considered a GOCC, until it is transferred to private ownership;
c) A corporation that is authorized to be established by special law, but which is still required under that law to register with the Securities and Exchange Commission in order to acquire a juridical personality, shall not, on the basis of the special law alone, be considered a GOCC.xxx
Inevitably, the refusal of the Supreme Court to clarify whether its Decision in the Mactan Cebu International Airport case is deemed repealed would leave us with an ambiguous situation where two (2) of our major international airports are treated differently tax wise: one in Cebu which is deemed to be a GOCC subject to real estate taxes and the other in Manila which is not a GOCC and exempt from real estate taxes.There are no good reasons why the Court should not reassert the Mactan Cebu doctrine. Under that ruling, real properties owned by the Republic of the Philippines or any of its political subdivisions are exempted from the payment of real property taxes, while instrumentalities or GOCCs are generally exempted from local government taxes, save for real property taxes. At the same time, Congress is free should it so desire to exempt particular GOCCs or instrumentalities from real property taxes by enacting legislation for that purpose. This paradigm is eminently more sober than that created by the Parañaque case, which attempted to amend the Constitution by elevating as a constitutional principle, the real property tax exemption of all government instrumentalities, most of which also happen to be GOCCs. Considering that the Constitution itself is supremely deferential to the notion of local government rule and the power of local governments to generate revenue through local taxes, the idea that not even the local government code could subject such "instrumentalities" to local taxes is plainly absurd.
Where lies the substantial difference between the two (2) airports? Your guess is as good as mine.[8]
SECTION 5. Functions, Powers, and Duties. -- The Authority shall have the following functions, powers and duties:There is thus that contradiction where property which ostensibly is classified as part of the public dominion under Article 420 of the Civil Code is nonetheless classified to lie within the commerce of man by virtue of a subsequent law such as the MIAA charter. In order for the Court to classify the MIAA properties as part of public dominion, it will be necessary to invalidate the provisions of the MIAA charter allowing the Authority to lease, sell, create pledges, mortgages and other voluntary liens or encumbrances on any of the airport properties. The provisions of the MIAA charter could not very well be invalidated with the Civil Code as basis, since the MIAA charter and the Civil Code are both statutes, and thus of equal rank in the hierarchy of laws, and more significantly the Civil Code was enacted earlier and therefore could not be the repealing law.
xxx xxx xxx
(i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable, or any interest therein;
xxx
SECTION 16. Borrowing Power. -- The Authority may, after consultation with the Minister of Finance and with the approval of the President of the Philippines, as recommended by the Minister of Transportation and Communications, raise funds, either from local or international sources, by way of loans, credits or securities, and other borrowing instruments, with the power to create pledges, mortgages and other voluntary liens or encumbrances on any of its assets or properties.
The second Public Ports Authority case, penned by Justice Callejo, likewise lays down useful doctrines in this regard. The Court refuted the claim that the properties of the PPA were owned by the Republic of the Philippines, noting that PPA's charter expressly transferred ownership over these properties to the PPA, a situation which similarly obtains with MIAA. The Court even went as far as saying that the fact that the PPA "had not been issued any torrens title over the port and port facilities and appurtenances is of no legal consequence. A torrens title does not, by itself, vest ownership; it is merely an evidence of title over properties. . . . It has never been recognized as a mode of acquiring ownership over real properties."
The Court further added:. . . The bare fact that the port and its facilities and appurtenances are accessible to the general public does not exempt it from the payment of real property taxes. It must be stressed that the said port facilities and appurtenances are the petitioner's corporate patrimonial properties, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. The petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its proprietary interests . . . The petitioner is even empowered to invest its funds in such government securities approved by the Board of Directors, and derives its income from rates, charges or fees for the use by vessels of the port premises, appliances or equipment. . . . Clearly then, the petitioner is a profit-earning corporation; hence, its patrimonial properties are subject to tax.There is no doubt that the properties of the MIAA, as with the PPA, are in a sense, for public use. A similar argument was propounded by the Light Rail Transit Authority in Light Rail Transit Authority v. Central Board of Assessment, 118 which was cited in Philippine Ports Authority and deserves renewed emphasis. The Light Rail Transit Authority (LRTA), a body corporate, "provides valuable transportation facilities to the paying public." 119 It claimed that its carriage-ways and terminal stations are immovably attached to government-owned
national roads, and to impose real property taxes thereupon would be to impose taxes on public roads. This view did not persuade the Court, whose decision was penned by Justice (now Chief Justice) Panganiban. It was noted:Though the creation of the LRTA was impelled by public service -- to provide mass transportation to alleviate the traffic and transportation situation in Metro Manila -- its operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives. Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation.There is no substantial distinction between the properties held by the PPA, the LRTA, and the MIAA. These three entities are in the business of operating facilities that promote public transportation.
xxx xxx xxx
Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations.
We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom.
xxx xxx xxx
Even granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity.
The majority further asserts that MIAA's properties, being part of the public dominion, are outside the commerce of man. But if this is so, then why does Section 3 of MIAA's charter authorize the President of the Philippines to approve the sale of any of these properties? In fact, why does MIAA's charter in the first place authorize the transfer of these airport properties, assuming that indeed these are beyond the commerce of man?[13]
Despite the fact that the City of Parañaque ineluctably has the power to impose real property taxes over the MIAA, there is an equally relevant statutory limitation on this power that must be fully upheld. Section 3 of the MIAA charter states that "[a]ny portion [of the [lands transferred, conveyed and assigned to the ownership and administration of the MIAA] shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines."Accordingly, I believe that MIAA is entitled to a writ of prohibition and injunctive relief enjoining the City of Pasay from auctioning for public sale the NAIA Pasay properties. Thus, the Court of Appeals erred when it denied those reliefs to the MIAA.
Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the collection of delinquent real property taxes. While the Local Government Code withdrew all previous local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other hand shielding its properties from any form of sale or disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It simply means that the LGU has to find another way to collect the taxes due from MIAA, thus paving the way for a mutually acceptable negotiated solution.
Under Book II, Title II, Chapter IV-Imposition of Real Property TaxA significant innovation in the LGC is the withdrawal, subject to some exceptions, of all tax exemption privileges of all natural or juridical persons, including government-owned and controlled corporations (GOCCs), thus:
Section 232. Power to Levy Real Property Tax.--A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted.[4]
Under Book II, Title I, Chapter V-Miscellaneous ProvisionsThis is where the controversy started. The airport authorities, formerly exempt from paying taxes, are now being obliged to pay real property tax on airport properties.
Section 193. Withdrawal of Tax Exemption Privileges.--Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.[5]
Section 133. Common Limitations on the Taxing Powers of Local Government Units.--Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:and the other in Book II, Title I, Chapter IV on Imposition of Real Property Tax:
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code;
(k) Taxes on premiums paid by way of reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.[6]
Section 234. Exemptions from Real Property Tax.--The following are exempted from payment of the real property tax:In Mactan Cebu International Airport Authority (MCIAA) v. Marcos,[8] the Court ruled that Section 133(o) is qualified by Sections 232 and 234. Thus, MCIAA could not seek refuge in Section 133(o), but only in Section 234(a) provided it could establish that the properties were owned by the Republic of the Philippines. The Court ratiocinated, thus:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.[7]
[R]eading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person," as provided in item (a) of the first paragraph of Section 234.In addition, the Court went on to hold that the properties comprising the Lahug International Airport and the Mactan International Airport are no longer owned by the Republic, the latter having conveyed the same absolutely to MCIAA.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234.
In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units cannot extend to the levy of:(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government units.[9]
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Parañaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.[11]
For the airport properties to be exempt from real property tax, they must fall within the mentioned categories. Logically, the airport properties can only qualify under the first exemption-by virtue of ownership. But, as already mentioned, the Court, nevertheless, ruled in Mactan Cebu that the said properties are no longer owned by the Republic having been conveyed absolutely to the airport Authority, thus:
(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered cooperatives. (b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i) charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and (iii) non-profit or religious cemeteries. (c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use to which they are devoted are: (i) all lands, buildings and improvements which are actually directly and exclusively used for religious, charitable or educational purposes; (ii) all machineries and equipment actually, directly and exclusively used by local water districts or by government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; and (iii) all machinery and equipment used for pollution control and environmental protection.
To help provide a healthy environment in the midst of the modernization of the country, all machinery and equipment for pollution control and environmental protection may not be taxed by local governments.[15]
Section 15 of the petitioner's Charter provides:In MIAA, a different conclusion was reached by the Court on two grounds. It first banked on the general provision limiting the taxing power of LGUs as stated in Section 133(o) of the LGC that, unless otherwise provided in the Code, the exercise of the taxing powers of LGUs shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and LGUs. The Court took pains in characterizing airport authorities as government instrumentalities, quite obviously, in order to apply the said provision.Sec. 15. Transfer of Existing Facilities and Intangible Assets. -- All existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation, aerodrome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, that the operations control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach control office, and the area control center shall be retained by the Air Transportation Office. No equipment, however, shall be removed by the Air Transportation Office from Mactan without the concurrence of the Authority. The Authority may assist in the maintenance of the Air Transportation Office equipment.The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International Airport in the Province of Cebu," which belonged to the Republic of the Philippines, then under the Air Transportation Office (ATO).
It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands," among other things, to the petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines.
This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner's authorized capital stock consists of, inter alia, "the value of such real estate owned and/or administered by the airports." Hence, the petitioner is now the owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable.[16]
2. Airport Lands and Buildings of MIAA are Owned by the RepublicIn the ultimate, I submit that the two rulings do not really contradict, but, instead, complement each one. Mactan Cebu provides the proper rule that, in order to determine whether airport properties are exempt from real property tax, it is Section 234, not Section 133, of the LGC that should be determinative of the properties exempt from the said tax. MIAA then lays down the correct doctrine that airport properties are of public dominion pertaining to the state, hence, falling within the ambit of Section 234(a) of the LGC.
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides:
x x x x
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user's tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A user's tax is more equitable -- a principle of taxation mandated in the 1987 Constitution.
The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both international and domestic air traffic," are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus:
x x x x
Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man:
x x x x
The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.
Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands," provide:
x x x x
Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:
x x x x
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus:
x x x x
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides:
x x x x
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus:
x x x x
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines." Section 234(a) provides:
x x x x
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:
x x x x[17]
Art. 420. The following things are property of public dominion:From the afore-quoted, we readily deduce that airport properties are of public dominion. The "port" in the enumeration certainly includes an airport. With its beacons, landing fields, runways, and hangars, an airport is analogous to a harbor with its lights, wharves and docks; the one is the landing place and haven of ships that navigate the water, the other of those that navigate the air.[24] Ample authority further supports the proposition that the term "roads" include runways and landing strips.[25] Airports, therefore, being properties of public dominion, are of the Republic.
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.
Art. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.
This article shows that there is a distinction between dominion and ownership. Private ownership is defined elsewhere in the Code; but the meaning of public dominion is nowhere defined. From the context of various provisions, it is clear that public dominion does not carry the idea of ownership; property of public dominion is not owned by the State, but pertains to the State, which as territorial sovereign exercises certain juridical prerogatives over such property. The ownership of such property, which has the special characteristics of a collective ownership for the general use and enjoyment, by virtue of their application to the satisfaction of the collective needs, is in the social group, whether national, provincial, or municipal. Their purpose is not to serve the State as a juridical person, but the citizens; they are intended for the common and public welfare, and so they cannot be the object of appropriation, either by the State or by private persons. The relation of the State to this property arises from the fact that the State is the juridical representative of the social group, and as such it takes care of them, preserves them and regulates their use for the general welfare.[26]Be that as it may, the legislative intent to exempt from real property tax the properties of the Republic remains clear. The soil constituting the NAIA airport and the runways cannot be taxed, being properties of public dominion and pertaining to the Republic. This is true even if the title to the said property is in the name of MIAA. Practical ownership, rather than the naked legal title, must control, particularly because, as a matter of practice, the record title may be in the name of a government agency or department rather than in the name of the Republic.
The country's premier airport was originally a US Air Force Base, which was turned over to the Philippine government in 1948. It started operations as a civil aviation airport with meager facilities, then consisting of the present domestic runway as its sole landing strip, and a small building northwest of this runway as its sole passenger terminal.The MIAA Charter further provides that any portion of the airport cannot be disposed of by the Authority through sale or through any other mode unless specifically approved by the President of the Philippines.[33] It is also noted that MIAA's board of directors is practically controlled by the national government, the members thereof being officials of the executive branch.[34] Likewise, the Authority cannot levy and collect dues, charges, fees or assessments for the use of the airport premises, works, appliances, facilities or concessions, or for any service provided by it, without the approval of several executive departments.[35] These provisions are consistent with an agency relationship. Let it be remembered that one of the principal elements of an agency relationship is the existence of some degree of control by the principal over the conduct and activities of the agent. In this regard, while an agent undertakes to act on behalf of his principal and subject to his control, a trustee as such is not subject to the control of the beneficiary, except that he is under a duty to deal with the trust property for the latter's benefit in accordance with the terms of the trust and can be compelled by the beneficiary to perform his duty.[36]
The airport's international runway and associated taxiway were built in 1953; followed in 1961 by the construction of a control tower and a terminal building for the exclusive use of international passengers at the southwest intersection of the two runways. These structures formed the key components of an airport system that came to be known as the Manila International Airport (MIA).
Like other national airports, the MIA was first managed and operated by the National Airports Corporation, an agency created on June 5, 1948 by virtue of Republic Act No. 224. This was abolished in 1951 and [in] its stead, the MIA Division was created under the Civil Aeronautics Administration (CAA) of the Department of Commerce and Industry.
On October 19, 1956, the entire CAA, including the MIA Division, was transferred to the Department of Public Works, Transportation and Communications.
In 1979, the CAA was renamed Bureau of Air Transportation following the creation of an exclusive Executive Department for Transportation and Communications.
It is worthwhile to note at this point that while the MIA General Manager then carried the rank of a Division Chief only, it became a matter of policy and practice that he be appointed by no less than the President of the Philippines since the magnitude of its impact on the country's economy has acquired such national importance and recognition.
During the seventies, the Philippine tourism and industry experienced a phenomenal upsurge in the country's manpower exports, resulting in more international flight frequencies to Manila which grew by more than four times.
Executive Order No. 381 promulgated by then President Marcos authorized the development of Manila International Airport to meet the needs of the coming decades.
A feasibility study/airport master plan was drawn up in 1973 by Airways Engineering Corporation, the financing of which was source[d] from a US$29.6 Million loan arranged with the Asian Development Bank (ADB). The detailed Engineering Design of the new MIA Development Project (MIADP) was undertaken by Renardet-Sauti/Transplan/F.F. Cruz Consultants while the design of the IPT building was prepared by Architect L.V. Locsin and Associates.
In 1974, the final engineering design was adopted by the Philippine Government. This was concurred by the ADB on September 18, 1975 and became known as the "Scheme E-5 Modified Plan." Actual work on the project started in the second quarter of 1978.
On March 4, 1982, EXECUTIVE ORDER NO. 778 was signed into law, abolishing the MIA Division under the BAT and creating in its stead the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), vested with the power to administer and operate the Manila International Airport (MIA).
Though MIAA was envisioned to be autonomous, Letter of Instructions (LOI) No. 1245, signed 31 May 1982, clarified that for purpose of policy integration and program coordination, the MIAA Management shall be under the general supervision but not control of the then Ministry of Transportation and Communications.
On July 21, 1983, Executive Order No. 903 was promulgated, providing that 65% of MIAA's annual gross operating income be reverted to the general fund for the maintenance and operation of other international and domestic airports in the country. It also scaled down the equity contribution of the National Government to MIAA: from PhP 10 billion to PhP 2.5 billion and removed the provision exempting MIAA from the payment of corporate tax.
Another revision in the MIAA Charter followed with the promulgation of Executive Order No. 909, signed September 16, 1983, increasing the membership of the MIAA Board to nine (9) Directors with the inclusion of two other members to be appointed by the Philippine President.
The last amendment to the MIAA Charter was made on July 26, 1987 through Executive Order No. 298 which provided for a more realistic income sharing arrangement between MIAA and the National Government. It provided that instead of the 65% of gross operating income, only 20% of MIAA's gross income, exclusive of income generated from the passenger terminal fees and utility charges, shall revert to the general fund of the National Treasury. EO 298 also reorganized the MIAA Board and raised the capitalization to its original magnitude of PhP 10 billion.
The post 1986 Revolution period will not be complete without mention of the renaming of MIA to Ninoy Aquino International Airport with the enactment of Republic Act No. 6639 on August 17, 1987. While this legislation renamed the airport complex, the MIA Authority would still retain its corporate name since it did not amend the original or revised charters of MIAA.[32]