PHILIPPINE FISHERIES G.R. No. 169836
DEVELOPMENT AUTHORITY,
Petitioner, Present:
Ynares-Santiago, J. (Chairperson),
- versus -
Austria-Martinez,
Chico-Nazario, and
Nachura, JJ.
COURT OF
APPEALS, OFFICE OF
THE
PRESIDENT, DEPARTMENT
OF FINANCE and
the CITY OF Promulgated:
Respondents.
x
----------------------------------------------------------------------------------------
x
YNARES-SANTIAGO, J.:
Assailed in this petition for review
is the June 21, 2005 Decision[1] of
the Court of Appeals in CA-G.R. SP No. 81228, which held that petitioner
Philippine Fisheries Development Authority (hereafter referred to as Authority)
is liable to pay real property taxes on the land and buildings of the Iloilo
Fishing Port Complex (IFPC) which are owned by the Republic of the Philippines
but operated and governed by the Authority.
The facts are not disputed.
On
Meanwhile, beginning October 31, 1981,
the then Ministry of Public Works and Highways reclaimed from the sea a
21-hectare parcel of land in Barangay Tanza, Iloilo City, and constructed
thereon the IFPC, consisting of breakwater, a landing quay, a refrigeration
building, a market hall, a municipal shed, an administration building, a water
and fuel oil supply system and other port related facilities and
machineries. Upon its completion, the
Ministry of Public Works and Highways turned over IFPC to the Authority,
pursuant to Section 11 of PD 977, which places fishing port complexes and
related facilities under the governance and operation of the Authority. Notwithstanding said turn over, title to the
land and buildings of the IFPC remained with the Republic.
The Authority thereafter leased
portions of IFPC to private firms and individuals engaged in fishing related
businesses.
Sometime in May 1988, the City of P5,057,349.67, inclusive of
penalties and interests. To satisfy the
tax delinquency, the City of
The Authority filed an injunction case
with the Regional Trial Court. At the pre-trial, the parties agreed to avail of
administrative proceedings, i.e., for
the Authority to file a claim for tax exemption with the Iloilo City Assessor’s
Office. The latter, however, denied the
claim for exemption, hence, the Authority elevated the case to the Department
of Finance (DOF).
In its letter-decision[3]
dated
The Authority filed a petition before
the Office of the President but it was dismissed.[5] It also denied the motion for reconsideration
filed by the Authority.[6]
On petition with the Court of Appeals,
the latter affirmed the decision of the Office of the President. It opined, however, that the IFPC may be sold
at public auction to satisfy the tax delinquency of the Authority.[7] The dispositive portion thereof, reads:
WHEREFORE, premises considered, the instant Petition for
Review is DENIED, and accordingly the
SO ORDERED.[8]
Hence, this petition.
The issues are as follows: Is the Authority liable to pay real property
tax to the City of
To resolve said issues, the Court has
to determine (1) whether the Authority is a government owned or controlled
corporation (GOCC) or an instrumentality of the national government; and (2)
whether the IFPC is a property of public dominion.
The Court rules that the Authority is not a GOCC but an instrumentality
of the national government which is generally exempt from payment of real
property tax. However, said exemption
does not apply to the portions of the IFPC which the Authority leased to
private entities. With respect to these
properties, the Authority is liable to pay real property tax. Nonetheless,
the IFPC, being a property of public dominion cannot be sold at public auction
to satisfy the tax delinquency.
In Manila
International Airport Authority (MIAA) v. Court of Appeals,[9] the Court made a distinction
between a GOCC and an instrumentality. Thus:
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
(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.
x
x x x
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.
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.[10]
(Emphasis supplied)
Thus, for an entity to be considered as a
GOCC, it must either be organized as a stock or non-stock corporation. Two requisites must concur before one may be
classified as a stock corporation, namely: (1) that it has capital stock
divided into shares, and (2) that it is authorized to distribute dividends and
allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot
be properly classified as a stock corporation.
As for non-stock corporations, they must have members and must not
distribute any part of their income to said members.[11]
On the basis of the parameters set in the MIAA case, the Authority should be classified as an
instrumentality of the national government.
As such, it is generally exempt from payment of real property tax,
except those portions which have been leased to private entities.
In the MIAA case, petitioner
Philippine Fisheries Development Authority was cited as among the instrumentalities of the national
government. Thus –
Some
of the national government instrumentalities vested by law with juridical
personalities are: Bangko Sentral ng Pilipinas, Philippine
Rice Research Institute, Laguna
Lake Development Authority, Fisheries Development Authority,
Bases Conversion Development Authority, Philippine Ports Authority, Cagayan de
Oro Port Authority, San Fernando Port Authority, Cebu Port Authority, and
Philippine National Railways.
Indeed, the Authority is not a GOCC but an
instrumentality of the government. The
Authority has a capital stock but it is not divided into shares of stocks.[12] Also, it has no stockholders or voting
shares. Hence, it is not a stock
corporation. Neither it is a non-stock
corporation because it has no members.
The Authority is actually a national
government instrumentality which is defined as an 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.[13] 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, the Authority which is tasked with the
special public function to carry out the government’s policy “to promote the development of the
country’s fishing industry and improve the efficiency in handling, preserving,
marketing, and distribution of fish and other aquatic products,” exercises the governmental powers
of eminent domain,[14]
and the power to levy fees and charges.[15] At the same time, the Authority exercises “the
general corporate powers conferred by laws upon private and government-owned or
controlled corporations.”[16]
The
MIAA case held[17] that unlike GOCCs, instrumentalities of the national government,
like MIAA, are exempt from
local taxes pursuant to Section 133(o) of the Local Government Code. This exemption, however, admits of an exception
with respect to real property taxes.
Applying Section 234(a) of the Local Government Code, the Court ruled
that when an instrumentality of the
national government grants to a taxable person the beneficial use of a real
property owned by the Republic, said instrumentality becomes liable to pay real
property tax. Thus, while MIAA was held to be an
instrumentality of the national government which is generally exempt from local
taxes, it was at the same time declared liable to pay real property taxes on
the airport lands and buildings which it leased to private persons. It was held that the real property tax
assessments and notices of delinquencies issued by the City of
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.
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. x x x
x
x x x
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[18]
(Emphasis supplied)
WHEREFORE, we GRANT the petition. We SET
ASIDE the assailed Resolutions of the Court of Appeals of
x
x x x.[19]
(Emphasis added)
In light of the foregoing,
the Authority should be classified as an instrumentality of the national
government which is liable to pay taxes only with respect to the portions of
the property, the beneficial use of which were vested in private entities. 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.[20]
Thus, the real property tax assessments issued by the City of
The
salient provisions of CA No. 141, on government reclaimed, foreshore and marshy
lands of the public domain, are as follows:
Sec.
59. The lands disposable under
this title shall be classified as follows:
(a) Lands reclaimed by the Government by
dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered
with water bordering upon the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the
foregoing classes.
x x x
x
Sec.
61. The lands comprised in classes
(a), (b), and (c) of section fifty-nine shall be disposed of to private parties
by lease only and not otherwise, as soon as the President,
upon recommendation by the Secretary of Agriculture, shall declare that
the same are not necessary for the public service and are open to
disposition under this chapter. The
lands included in class (d) may be disposed of by sale or lease under the
provisions of this Act.”
(Emphasis supplied)
x x x
x
Since
then and until now, the only way the government can sell to private parties
government reclaimed and marshy disposable lands of the public domain is for
the legislature to pass a law authorizing such sale. CA No. 141 does not authorize the President
to reclassify government reclaimed and marshy lands into other non-agricultural
lands under Section 59 (d). Lands classified under Section 59 (d) are the only
alienable or disposable lands for non-agricultural purposes that the government
could sell to private parties. (Emphasis
supplied)
In the same vein, the port built by the State in the
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.
The
In sum, the Court finds that the Authority is an instrumentality of the
national government, hence, it is liable to pay real property taxes assessed by
the City of
WHEREFORE, the
petition is GRANTED and the June 21, 2005 Decision of the Court of
Appeals in CA-G.R. SP No. 81228 is SET ASIDE. The real property tax assessments issued
by the City Iloilo on the land and buildings of the Iloilo Fishing Port Complex, is
declared VOID except those pertaining to the portions leased to private
parties. The City of
No costs.
SO ORDERED.
CONSUELO
YNARES-SANTIAGO
Associate Justice
WE CONCUR:
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA
Associate
Justice Associate Justice
ATTESTATION
I attest that the conclusions in the above decision were
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson’s Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Rollo, pp. 47-55. Penned by Associate Justice Rosmari D.
Carandang and concurred in by Associate Justices Remedios A. Salazar-Fernando
and Monina Arevalo-Zenarosa.
[2]
Book IV, Title IV, Chapter 6, Section 47, Executive Order No. 292 (1987).
[3] Rollo, pp. 128-131.
[4]
[5]
[6]
[7]
[8]
[9]
G.R. No. 155650,
[10]
[11]Agbayani,
Commentaries and Jurisprudence on the Commercial Laws of the
[12]
Sec. 5. Capitalization; Sinking Fund.
The Authority shall have an authorized capital stock of Five Hundred
Million Pesos (P500,000,000.00) which shall be fully subscribed by the
Republic of the
(a) The net assets of the Authority, including the Navotas
fishing port complex, the valuation of which shall be determined jointly with
the Office of Budget and Management and the Commission on Audit;
(b) The amount corresponding to the balance of the programmed
appropriations for the Authority for calendar year 1981; and
(c) The amount corresponding to the programmed appropriations
for the Authority for the calendar year 1982.
The
Authority is authorized to establish a sinking fund necessary to meet such
obligations as may be incurred by the Authority. The annual contributions to the sinking fund
shall come from the revenues derived from its fishing port complexes and, where
such revenues are deficient, from such other corporate funds not otherwise
intended for any specific purpose as may be designated by the Board. Unless otherwise directed by the Board, the
sinking fund shall be placed under the custody of any government bank which
shall invest the same in such manner as may be advantageous to the Authority.
[13]
Section 2(10) of the Introductory Provisions of the Administrative Code.
[14]
Section 4 (k) of PD 977, as amended by EO 772.
[15]
Section 4 (e) of PD 977, as amended by EO 772.
[16] Section 4 (j) of PD 977, as amended by EO
772.
[17] Supra note 9 at 645.
[18]
[19]
[20]
[21] Chavez
v. Public Estates Authority, G.R. No. 133250,
[22] Manila
International Airport Authority (MIAA) v. Court of Appeals, supra note 9 at 646; Laurel v. Garcia, G.R. Nos. 92013 &
92047, July 25, 1990, 187 SCRA 797, 808-809.