AIRPORT
AUTHORITY,
Petitioner, Present:
PANGANIBAN, C.J.,
PUNO,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
- versus -
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
COURT OF
APPEALS, CITY OF
PARAÑAQUE, SANGGUNIANG GARCIA, and
PANGLUNGSOD NG PARAÑAQUE, VELASCO, JR., JJ.
CITY ASSESSOR
OF PARAÑAQUE,
and CITY TREASURER OF Promulgated:
PARAÑAQUE,
x- - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - x
CARPIO, J.:
As operator
of the international airport, MIAA administers the land, improvements and
equipment within the NAIA Complex. The
MIAA Charter transferred to MIAA approximately 600 hectares of land,[3]
including the runways and buildings (“
On
On
|
TAX DECLARATION |
TAXABLE
YEAR |
TAX DUE |
PENALTY |
TOTAL |
|
E-016-01370 |
1992-2001 |
19,558,160.00 |
11,201,083.20 |
30,789,243.20 |
|
E-016-01374 |
1992-2001 |
111,689,424.90 |
68,149,479.59 |
179,838,904.49 |
|
E-016-01375 |
1992-2001 |
20,276,058.00 |
12,371,832.00 |
32,647,890.00 |
|
E-016-01376 |
1992-2001 |
58,144,028.00 |
35,477,712.00 |
93,621,740.00 |
|
E-016-01377 |
1992-2001 |
18,134,614.65 |
11,065,188.59 |
29,199,803.24 |
|
E-016-01378 |
1992-2001 |
111,107,950.40 |
67,794,681.59 |
178,902,631.99 |
|
E-016-01379 |
1992-2001 |
4,322,340.00 |
2,637,360.00 |
6,959,700.00 |
|
E-016-01380 |
1992-2001 |
7,776,436.00 |
4,744,944.00 |
12,521,380.00 |
|
*E-016-013-85 |
1998-2001 |
6,444,810.00 |
2,900,164.50 |
9,344,974.50 |
|
*E-016-01387 |
1998-2001 |
34,876,800.00 |
5,694,560.00 |
50,571,360.00 |
|
*E-016-01396 |
1998-2001 |
75,240.00 |
33,858.00 |
109,098.00 |
|
GRAND TOTAL |
|
|
|
|
1992-1997 RPT was paid on P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.00[6]
On
On
On
On
Meanwhile, in January 2003, the City
of
A day before the public auction, or on
6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory
Motion for the Issuance of a Temporary Restraining Order. The motion sought to
restrain respondents — the City of Parañaque, City
Mayor of Parañaque, Sangguniang
Panglungsod ng Parañaque, City Treasurer of Parañaque,
and the City Assessor of Parañaque (“respondents”) —
from auctioning the Airport Lands and Buildings.
On
On
On
MIAA admits that the MIAA
Charter has placed the title to the
MIAA also points out that
Section 21 of the MIAA Charter specifically exempts MIAA from the
payment of real estate tax. MIAA insists
that it is also exempt from real estate tax under Section 234 of the Local
Government Code because the
Respondents invoke Section 193 of the
Local Government Code, which expressly withdrew the tax exemption
privileges of “government-owned and-controlled corporations” upon the
effectivity of the Local Government Code.
Respondents also argue that a basic rule of statutory construction is
that the express mention of one person, thing, or act excludes all others. An international airport is not among the
exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot
claim that the
Respondents
also cite the ruling of this Court in Mactan International Airport v. Marcos[8] where we held that the Local Government
Code has withdrawn the exemption from real estate tax granted to international
airports. Respondents further argue that
since MIAA has already paid some of the real estate tax assessments, it is now
estopped from claiming that the
This petition raises the threshold issue of whether
the
The Court’s Ruling
We
rule that MIAA’s
First, MIAA is not a government-owned or
controlled corporation but an instrumentality
of the National Government and thus exempt from local taxation. Second,
the real properties of MIAA are owned by
the Republic of the
1. MIAA is
Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned
or controlled corporation, is not exempt from real estate tax. Respondents claim that the deletion of the
phrase “any government-owned or controlled so exempt by its charter” in Section
234(e) of the Local Government Code withdrew the real estate tax exemption
of government-owned or controlled corporations.
The deleted phrase appeared in Section 40(a) of the 1974 Real Property
Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or
controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled
corporation. Section 2(13) of the
Introductory Provisions
of the Administrative Code of 1987 defines a government-owned or controlled
corporation as follows:
SEC. 2. General Terms Defined. – x
x x x
(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: x x x. (Emphasis supplied)
A government-owned or controlled
corporation must be “organized as a
stock or non-stock corporation.”
MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it
has no capital stock divided into shares. MIAA has no stockholders or voting
shares. Section 10 of the MIAA Charter[9]
provides:
SECTION 10. Capital. — The capital of the Authority
to be contributed by the National Government shall be increased from Two and
One-half Billion (P2,500,000,000.00) Pesos to
Ten Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties;
(b) That the amount of P605 million
as of December 31, 1986 representing about seventy percentum
(70%) of the unremitted share of the National Government from 1983 to 1986 to
be remitted to the National Treasury as provided for in Section 11 of E. O. No.
903 as amended, shall be converted into the equity of the National Government
in the Authority. Thereafter, the Government contribution to the capital of the
Authority shall be provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital
stock that is divided into shares.
Section
3 of the Corporation Code[10]
defines a stock corporation as one whose “capital
stock is divided into shares and 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.
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.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to perform
efficiently its governmental functions.
MIAA is like any other government instrumentality,
the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions
of the Administrative Code defines a government “instrumentality” as follows:
SEC. 2. General Terms Defined. –– x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)
When the law vests in a government
instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate
powers. Thus, MIAA exercises the
governmental powers of eminent domain,[12]
police authority[13] and the
levying of fees and charges.[14] At the same time, MIAA exercises “all the
powers of a corporation under the Corporation Law, insofar as these powers are
not inconsistent with the provisions of this Executive Order.”[15]
Likewise,
when the law makes a government instrumentality operationally autonomous,
the instrumentality remains part of the National Government machinery although
not integrated with the department framework.
The MIAA Charter expressly states that transforming MIAA into a
“separate and autonomous body”[16]
will make its operation more “financially viable.”[17]
Many government instrumentalities are
vested with corporate powers but they do not become stock or non-stock
corporations, which is a necessary condition before an agency or instrumentality
is deemed a government-owned or controlled corporation. Examples are the Mactan
International Airport Authority, the Philippine Ports Authority, the University
of the
A government instrumentality like MIAA falls under Section 133(o) of the Local
Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
x x x x
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (Emphasis and underscoring supplied)
Section 133(o) recognizes the basic
principle that local governments cannot tax the national government, which
historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes
taxation as one of the powers of local governments, local governments may only
exercise such power “subject to such guidelines and limitations as the Congress
may provide.”[18]
When local governments invoke the power to tax on
national government instrumentalities, such power is construed strictly against
local governments. The rule is that a
tax is never presumed and there must be clear language in the law imposing the
tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation. This rule applies with greater force when
local governments seek to tax national government instrumentalities.
Another rule is that a tax exemption
is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption
to a national government instrumentality from local taxation, such exemption is
construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of
exemptions running to the benefit of the government itself or its agencies. In
such case the practical effect of an exemption is merely to reduce the amount
of money that has to be handled by government in the course of its operations.
For these reasons, provisions granting exemptions to government agencies may be
construed liberally, in favor of non tax-liability of such agencies.[19]
There is, moreover, no point in national and local
governments taxing each other, unless a sound and compelling policy requires
such transfer of public funds from one government pocket to another.
There is also no reason for local
governments to tax national government instrumentalities for rendering
essential public services to inhabitants of local governments. The
only exception is when the legislature clearly intended to tax government
instrumentalities for the delivery of essential public services for sound and
compelling policy considerations.
There must be express language in the law empowering local governments
to tax national government instrumentalities.
Any doubt whether such power exists is resolved against local
governments.
Thus, Section 133 of the Local Government Code states that “unless otherwise provided” in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation:
The states have no power by
taxation or otherwise, to retard, impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to carry into execution
the powers vested in the federal government. (MC Culloch
v.
This doctrine emanates from the “supremacy” of the National Government over local governments.
“Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them.” (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise,
mere creatures of the State can defeat National policies thru extermination of
what local authorities may perceive to be undesirable activities or enterprise
using the power to tax as “a tool for regulation” (
The
power to tax which was called by Justice Marshall as the “power to destroy” (Mc
Culloch v.
2.
a.
The
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State.
No one can dispute that properties of
public dominion mentioned in Article 420 of the Civil Code, like “roads, canals, rivers, torrents, ports
and bridges constructed by the State,” are owned by the State. The
term “ports” includes seaports and airports. The
The
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.[21]
The
b.
The
According to article 344 of the Civil Code: “Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces.”
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: “Communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc.” (Emphasis supplied) [23]
Again in Espiritu v.
Municipal Council, the Court declared that properties of public
dominion are outside the commerce of man:
The Court has also ruled that
property of public dominion, being outside the commerce of man, cannot be the
subject of an auction sale.[25]
Properties of public dominion, being for public use,
are not subject to levy, encumbrance or disposition through public or private
sale. Any encumbrance, levy on execution
or auction sale of any property of public dominion is void for being contrary
to public policy. Essential public
services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale.
This will happen if the City of
Before MIAA can encumber[26]
the
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public fishponds, working men’s village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this Act or by proclamation of the President. (Emphasis and underscoring supplied)
Thus,
unless the President issues a proclamation withdrawing the
The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:
SEC. 14. Power to
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the
SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:
(1) For
property belonging to and titled in the name of the Republic of the
(2) For
property belonging to the Republic of the
In MIAA’s
case, its status as a mere trustee of the
d. Transfer to MIAA was Meant to
Implement a Reorganization
The MIAA
Charter, which is a law, transferred to MIAA the title to the
SECTION 3. Creation of the
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
SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the
x x x x.
The MIAA Charter transferred the
The whereas clauses of the MIAA Charter explain the
rationale for the transfer of the
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air traffic, is required to provide standards of airport accommodation and service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future air traffic and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and service within the context of a financially viable operation, will best be achieved by a separate and autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is given continuing authority to reorganize the National Government, which authority includes the creation of new entities, agencies and instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the
The MIAA Charter expressly provides
that the
At any time, the President can transfer back to the
Republic title to the
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
SEC. 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax:
(a)
Real property owned by the Republic of
the Philippines or any of its political subdivisions except when the beneficial
use thereof has been granted, for consideration or otherwise, to a taxable
person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing “[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities 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
However, portions of the
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.[29]
3.
Refutation of Arguments of Minority
The minority asserts that the MIAA is
not exempt from real estate tax because Section 193 of the Local Government
Code of 1991 withdrew the tax exemption of “all persons, whether natural or juridical” upon the effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges – Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is
indisputably a juridical person. The minority argues that since the Local
Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate
tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.
The term “All persons” encompasses the two classes of persons recognized under our laws, natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in the original)
The minority posits that the “determinative test” whether MIAA is
exempt from local taxation is its status — whether
MIAA is a juridical person or not.
The minority also insists that “Sections
193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAA’s claim of exemption.”
The argument of the minority is
fatally flawed. Section 193 of the
Local Government Code expressly withdrew the tax exemption of all juridical
persons “[u]nless
otherwise provided in this Code.”
Now, Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of tax on
national government instrumentalities.
Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
x x x x
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. (Emphasis and underscoring supplied)
By express mandate of the Local
Government Code, local governments cannot
impose any kind of tax on national government instrumentalities like the
MIAA. Local governments are devoid of power to tax the national government,
its agencies and instrumentalities. The taxing powers of local governments do not
extend to the national government, its agencies and instrumentalities, “[u]nless otherwise provided in this Code” as stated in the
saving clause of Section 133. The
saving clause refers to Section 234(a) on the exception to the exemption from
real estate tax of real property owned by the Republic.
The minority, however, theorizes that
unless exempted in Section 193 itself, all
juridical persons are subject to tax by local governments. The
minority insists that the juridical persons exempt from local taxation are
limited to the three classes of entities specifically enumerated as exempt in
Section 193. Thus, the minority
states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied)
The minority’s theory directly
contradicts and completely negates Section 133(o) of the Local Government
Code. This theory will result in gross
absurdities. It will make the national government, which itself is a juridical person,
subject to tax by local governments
since the national government is not included in the enumeration of exempt
entities in Section 193. Under this
theory, local governments can impose any
kind of local tax, and not only real
estate tax, on the national government.
Under the minority’s theory, many
national government instrumentalities with juridical personalities will also be
subject to any kind of local tax, and
not only real estate tax. Some of
the national government instrumentalities vested
by law with juridical personalities are: Bangko Sentral ng Pilipinas,[30] Philippine
Rice Research Institute,[31]
Development Authority,[32]
Fisheries Development Authority,[33]
Bases Conversion Development Authority,[34]
Philippine Ports Authority,[35] Cagayan de Oro Port Authority,[36]
San Fernando Port Authority,[37] Cebu Port Authority,[38]
and Philippine National Railways.[39]
The minority’s theory violates
Section 133(o) of the Local Government Code which expressly prohibits local
governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) does not distinguish between national government
instrumentalities with or without juridical personalities. Where the law does not distinguish, courts
should not distinguish. Thus, Section
133(o) applies to all national government instrumentalities, with or without
juridical personalities. The determinative test whether MIAA is
exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government
instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of
law prohibiting local governments from imposing any kind of tax on the national
government, its agencies and instrumentalities.
Section
133 of the Local Government Code starts with the saving clause “[u]nless otherwise
provided in this Code.” This means
that unless the Local Government Code grants an express authorization, local
governments have no power to tax the national government, its agencies and
instrumentalities. Clearly, the rule is local governments have no power
to tax the national government, its agencies and instrumentalities. As an exception to this rule, local
governments may tax the national government, its agencies and instrumentalities
only if the Local Government Code
expressly so provides.
The saving clause in Section 133
refers to the exception to the exemption in Section 234(a) of the Code, which
makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable
entity. Section 234(a) of the Local
Government Code provides:
SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property
owned by the Republic is exempt from real estate tax. The exception
to this exemption is when the government gives the beneficial use of the
real property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance
when the national government, its agencies and instrumentalities are subject to
any kind of tax by local governments. The exception to the
exemption applies only to real estate tax and not to any other tax. The justification for the exception to the
exemption is that the real property, although owned by the Republic, is not
devoted to public use or public service but devoted to the private gain of a
taxable person.
The
minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the
later provisions prevail over Section 133.
Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section
133 on one hand, and Sections 193 and 234 on the
other. No one has urged that there is
such a conflict, much less has any one presented a persuasive argument that there is
such a conflict. The minority’s
assumption of an irreconcilable conflict in the statutory provisions is an
egregious error for two reasons.
First, there
is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its
subordination to other provisions of the Code when Section 193 states “[u]nless otherwise
provided in this Code.” By its own
words, Section 193 admits the superiority
of other provisions of the Local Government Code that limit the exercise of the
taxing power in Section 193. When a
provision of law grants a power but withholds such power on certain matters,
there is no conflict between the grant of power and the withholding of
power. The grantee of the power simply
cannot exercise the power on matters withheld from its power.
Second, Section 133 is entitled “Common Limitations on the Taxing Powers of
Local Government Units.” Section 133
limits the grant to local governments of the power to tax, and not merely the
exercise of a delegated power to tax.
Section 133 states that the taxing powers of local governments “shall not extend to the levy” of any
kind of tax on the national government, its agencies and
instrumentalities. There is no clearer
limitation on the taxing power than this.
Since Section 133 prescribes the “common limitations” on the taxing powers of local governments,
Section 133 logically prevails over Section 193 which grants local governments
such taxing powers. By their very meaning and purpose, the “common limitations” on the
taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in
Section 193 prevails over the limitations on such taxing power in Section 133,
then local governments can impose any kind of tax on the national government,
its agencies and instrumentalities
— a gross absurdity.
Local governments have no power to tax the national
government, its agencies and instrumentalities, except as otherwise provided in
the Local Government Code pursuant to the saving clause in Section 133 stating
“[u]nless otherwise provided in this Code.” This exception — which is an exception to
the exemption of the Republic from real estate tax imposed by local governments
— refers to Section 234(a) of the Code.
The exception to the exemption in Section 234(a) subjects real property
owned by the Republic, whether titled in the name of the national government,
its agencies or instrumentalities, to real estate tax if the beneficial use of
such property is given to a taxable entity.
The
minority also claims that the definition in the Administrative Code of the
phrase “government-owned or controlled corporation” is not controlling. The minority points out that Section 2 of the
Introductory Provisions of the Administrative Code admits that its definitions
are not controlling when it provides:
SEC. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning:
x x x x
The minority then concludes that reliance on the
Administrative Code definition is “flawed.”
The
minority’s argument is a non sequitur. True, Section 2 of the Administrative Code
recognizes that a statute may require a different meaning than that defined in
the Administrative Code. However, this
does not automatically mean that the definition in the Administrative Code does
not apply to the Local Government Code.
Section 2 of the Administrative Code clearly states that “unless the specific words x x x of a particular statute shall
require a different meaning,” the definition in Section 2 of the
Administrative Code shall apply. Thus,
unless there is specific language in the Local Government Code defining the
phrase “government-owned or controlled corporation” differently from the
definition in the Administrative Code, the definition in the Administrative
Code prevails.
The
minority does not point to any provision in the Local Government Code defining
the phrase “government-owned or controlled corporation” differently from the
definition in the Administrative Code.
Indeed, there is none. The Local Government Code is silent on the
definition of the phrase “government-owned or controlled corporation.” The
Administrative Code, however, expressly defines the phrase “government-owned or
controlled corporation.” The inescapable
conclusion is that the Administrative Code definition of the phrase
“government-owned or controlled corporation” applies to the Local Government
Code.
The
third whereas clause of the Administrative Code states that the Code “incorporates in a unified document the
major structural, functional and procedural principles and rules of governance.” Thus, the Administrative Code is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and
instrumentalities. Unless a statute expressly provides for a
different status and relationship for a specific government unit or entity, the
provisions of the Administrative Code prevail.
The
minority also contends that the phrase “government-owned or controlled corporation”
should apply only to corporations organized under the Corporation Code, the
general incorporation law, and not to corporations created by special
charters. The minority sees no reason
why government corporations with special charters should have a capital
stock. Thus, the minority declares:
I submit that the definition of “government-owned or controlled corporations” under the Administrative Code refer to those corporations owned by the government or its instrumentalities which are created not by legislative enactment, but formed and organized under the Corporation Code through registration with the Securities and Exchange Commission. In short, these are GOCCs without original charters.
x x x x
It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and
existing legislations. It will also
result in gross absurdities.
First, the Administrative Code
definition of the phrase “government-owned or controlled corporation” does not
distinguish between one incorporated under the Corporation Code or under a
special charter. Where the law does not
distinguish, courts should not distinguish.
Second, Congress has created through
special charters several government-owned corporations organized as stock corporations.
Prime examples are the Land Bank of the
SECTION 81. Capital. — The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)
Likewise,
the special charter[41]
of the Development Bank of the
SECTION 7. Authorized Capital Stock – Par value. — The capital stock of the Bank shall be Five
Billion Pesos to be divided into Fifty Million common shares with par value of P100
per share. These shares are available for subscription by the National
Government. Upon the effectivity of this Charter, the National Government shall
subscribe to Twenty-Five Million common shares of stock worth Two Billion Five
Hundred Million which shall be deemed paid for by the Government with the net
asset values of the Bank remaining after the transfer of assets and liabilities
as provided in Section 30 hereof.
(Emphasis supplied)
Other government-owned corporations
organized as stock corporations under their special charters are the Philippine
Crop Insurance Corporation,[42]
Philippine International Trading Corporation,[43]
and the Philippine National Bank[44]
before it was reorganized as a stock corporation under the Corporation
Code. All these government-owned
corporations organized under special charters as stock corporations are subject
to real estate tax on real properties owned by them. To rule that they are not government-owned
or controlled corporations because they are not registered with the Securities
and Exchange Commission would remove them from the reach of Section 234 of the
Local Government Code, thus exempting them from real estate tax.
Third, the
government-owned or controlled corporations created through special charters
are those that meet the two conditions prescribed in Section 16, Article XII of
the Constitution. The first condition is that the government-owned or
controlled corporation must be established for the common good. The
second condition is that the government-owned or controlled corporation must
meet the test of economic viability.
Section 16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes
the legislature to create “government-owned or controlled corporations” through
special charters only if these
entities are required to meet the twin conditions of common good and economic
viability. In other words, Congress has no power to create government-owned or
controlled corporations with special charters unless they are made to comply
with the two conditions of common good and economic viability. The test of economic viability applies only
to government-owned or controlled corporations that perform economic or
commercial activities and need to compete in the market place. Being essentially economic vehicles of the
State for the common good — meaning for economic development purposes — these
government-owned or controlled corporations with special charters are usually
organized as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with
corporate powers and performing governmental or public functions need not meet
the test of economic viability. These
instrumentalities perform essential public services for the common good,
services that every modern State must provide its citizens. These instrumentalities need not be
economically viable since the government may even subsidize their entire
operations. These instrumentalities are not the “government-owned or controlled
corporations” referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no
limitation when the legislature creates government instrumentalities vested
with corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create government instrumentalities
vested with corporate powers provided these instrumentalities perform essential
government functions or public services.
However, when the legislature creates through special
charters corporations that perform economic or commercial activities, such
entities — known as “government-owned or controlled corporations” — must meet
the test of economic viability because they compete in the market place.
This is the situation of the Land Bank of the
Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
follows:
MR.
OPLE: Madam President, the reason for
this concern is really that when the government creates a corporation, there is
a sense in which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government corporation
loses, then it makes its claim upon the taxpayers’ money through new equity
infusions from the government and what is always invoked is the common good.
That is the reason why this year, out of a budget of P115 billion for
the entire government, about P28 billion of this will go into equity
infusions to support a few government financial institutions. And this is all
taxpayers’ money which could have been relocated to agrarian reform, to social
services like health and education, to augment the salaries of grossly
underpaid public employees. And yet this is all going down the drain.
Therefore,
when we insert the phrase “ECONOMIC VIABILITY” together with the “common good,”
this becomes a restraint on future enthusiasts for state capitalism to excuse
themselves from the responsibility of meeting the market test so that they
become viable. And so, Madam President, I reiterate, for the committee’s
consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of “ECONOMIC VIABILITY
OR THE ECONOMIC TEST,” together with the common good.[45]
Father Joaquin G. Bernas,
a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the
Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase “in the interest of the common good and subject to the test of economic viability.” The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.[46] (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public.
However,
government-owned or controlled corporations with special charters, organized
essentially for economic or commercial objectives, must meet the test of
economic viability. These are the
government-owned or controlled corporations that are usually organized under
their special charters as stock corporations, like the Land Bank of the
The MIAA need not meet the test of economic viability
because the legislature did not create MIAA to compete in the market
place. MIAA does not compete in the
market place because there is no competing international airport operated by
the private sector. MIAA performs an
essential public service as the primary domestic and international airport of
the
1. The Bureau of Immigration
and Deportation, to document the arrival and departure of passengers, screening
out those without visas or travel documents, or those with hold departure
orders;
2. The Bureau of Customs, to
collect import duties or enforce the ban on prohibited importations;
3. The quarantine office of the
Department of Health, to enforce health measures against the spread of
infectious diseases into the country;
4. The Department of
Agriculture, to enforce measures against the spread of plant and animal
diseases into the country;
5. The Aviation Security
Command of the Philippine National Police, to prevent the entry of terrorists
and the escape of criminals, as well as to secure the airport premises from
terrorist attack or seizure;
6. The Air Traffic Office of
the Department of Transportation and Communications, to authorize aircraft to
enter or leave Philippine airspace, as well as to land on, or take off from,
the airport; and
7. The MIAA, to provide the
proper premises — such as runway and buildings — for the government personnel,
passengers, and airlines, and to manage the airport operations.
All these agencies of
government perform government functions essential to the operation of an
international airport.
MIAA performs an essential public service that every
modern State must provide its citizens.
MIAA derives its revenues principally from the mandatory fees and
charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every
passenger are regulatory or administrative fees[47]
and not income from commercial transactions.
MIAA falls under the definition of a
government instrumentality under
Section 2(10) of the Introductory Provisions of the Administrative Code, which
provides:
SEC. 2. General
Terms Defined. – x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate
powers does not make MIAA a government-owned or controlled corporation. Without a change in its capital structure,
MIAA remains a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code. More importantly, as long as MIAA renders
essential public services, it need not comply with the test of economic
viability. Thus, MIAA is outside the
scope of the phrase “government-owned or controlled corporations” under Section
16, Article XII of the 1987 Constitution.
The minority belittles the use in the
Local Government Code of the phrase “government-owned or controlled
corporation” as merely “clarificatory or illustrative.” This is fatal. The 1987 Constitution
prescribes explicit conditions for the creation of “government-owned or
controlled corporations.” The
Administrative Code defines what constitutes a “government-owned or controlled
corporation.” To belittle this phrase
as “clarificatory or illustrative” is grave error.
To summarize, MIAA is not a government-owned or
controlled corporation under Section 2(13) of the Introductory Provisions of
the Administrative 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.
Finally, the
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)
The term “ports x x x
constructed by the State” includes airports
and seaports. The
4. Conclusion
Under
Section 2(10) and (13) of the Introductory Provisions of the Administrative
Code, which governs the legal relation and status of government units, agencies
and offices within the entire government machinery, MIAA is a government instrumentality and not a
government-owned or controlled corporation.
Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person
because it is not subject to “[t]axes, fees or charges of any kind” by local
governments. The only exception is when MIAA leases its real property to a
“taxable person” as provided in Section 234(a) of the Local Government Code, in
which case the specific real property leased becomes subject to real estate
tax. Thus, only portions of the
Under
Article 420 of the Civil Code, the
WHEREFORE, we GRANT the petition. We SET
ASIDE the assailed Resolutions of the Court of Appeals of
No costs.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
ARTEMIO V.
PANGANIBAN
Chief Justice
REYNATO S. PUNO
Associate Justice |
LEONARDO A. QUISUMBING Associate Justice |
|
|
CONSUELO YNARES-SANTIAGO Associate Justice |
ANGELINA SANDOVAL-GUTIERREZ Associate Justice
|
|
|
MA. ALICIA AUSTRIA-MARTINEZ Associate Justice |
RENATO
C. CORONA Associate Justice
|
|
|
CONCHITA CARPIO MORALES Associate Justice |
ROMEO
J. CALLEJO, SR. Associate Justice |
|
|
ADOLFO S. AZCUNA Associate Justice |
DANTE O. TINGA Associate Justice |
|
|
MINITA V. CHICO-NAZARIO Associate
Justice |
CANCIO C. GARCIA Associate Justice |
|
PRESBITERO J. VELASCO, JR.
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.
ARTEMIO V. PANGANIBAN
Chief Justice
[1] Dated
[2] Dated
[3] Section 3, MIAA Charter.
[4] Section 22, MIAA Charter.
[7] Under Rule 45 of the 1997 Rules of Civil Procedure.
[9] MIAA Charter as amended by Executive Order No. 298. See note 2.
[10] Batas Pambansa Blg. 68.
[11] Section 11 of the MIAA Charter provides:
Contribution to the General Fund for the Maintenance and Operation of other Airports. – Within thirty (30) days after the close of each quarter, twenty percentum (20%) of the gross operating income, excluding payments for utilities of tenants and concessionaires and terminal fee collections, shall be remitted to the General Fund in the National Treasury to be used for the maintenance and operation of other international and domestic airports in the country. Adjustments in the amount paid by the Authority to the National Treasury under this Section shall be made at the end of each year based on the audited financial statements of the Authority.
[12] Section 5(j), MIAA Charter.
[13] Section 6, MIAA Charter.
[14] Section 5(k), MIAA Charter.
[15] Section 5(o), MIAA Charter.
[16] Third Whereas Clause, MIAA Charter.
[17]
[18] Constitution, Art. X, Sec. 5.
[19] 274 Phil. 1060, 1100 (1991) quoting C. Dallas Sands, 3 Statutes and Statutory Construction 207.
[21] Constitution, Art. VI, Sec. 28(1).
[23] 30 Phil. 602, 606-607 (1915).
[24] 102 Phil. 866, 869-870 (1958).
[25] PNB v. Puruganan, 130 Phil. 498 (1968). See also Martinez v. CA, 155 Phil. 591 (1974).
[26] MIAA Charter, Sec.16.
[27] Chavez v. Public Estates Authority, 433 Phil. 506 (2002).
[28] Section 3, MIAA Charter.
[29]
G.R. No. 144104,
[30] Republic Act No. 7653,
[31] Executive Order No. 1061,
[32] Republic Act No. 4850,
[33] Presidential Decree No. 977,
[34] Republic Act No. 7227,
[35] Presidential Decree No. 857,
[36] Republic Act No. 4663,
[37] Republic Act No. 4567,
[38] Republic Act No. 7621,
[39] Republic Act No. 4156,
[40] Republic Act No. 3844,
[42] Republic Act No. 8175,
[43] Presidential Decree No. 252,
[44] Executive Order No. 80,
[46] 2003 ed., 1181.
[47]