EN BANC E-016-01375 1992-2001 20,276,058.00 12,371,832.

00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00
G.R. No. 155650 July 20, 2006
E-016-01377 1992-2001 18,134,614.65 11,065,188.59

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, E-016-01378 1992-2001 111,107,950.40 67,794,681.59

vs. E-016-01379 1992-2001 4,322,340.00 2,637,360.00
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, E-016-01380 1992-2001 7,776,436.00 4,744,944.00
SANGGUNIANG PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF
PARAÑAQUE, and CITY TREASURER OF PARAÑAQUE, respondents. *E-016-013-85 1998-2001 6,444,810.00 2,900,164.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00
DECISION *E-016-01396 1998-2001 75,240.00 33,858.00
GRAND TOTAL P392,435,861.95 P232,070,863.47
CARPIO, J.:
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for
The Antecedents P4,207,028.75

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino #9476101 for P28,676,480.00
International Airport (NAIA) Complex in Parañaque City under Executive Order No.
903, otherwise known as the Revised Charter of the Manila International Airport
#9476103 for P49,115.006
Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by
then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 909 1 and
2982 amended the MIAA Charter. On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of
levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of
Parañaque threatened to sell at public auction the Airport Lands and Buildings should
As operator of the international airport, MIAA administers the land, improvements and
MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of
equipment within the NAIA Complex. The MIAA Charter transferred to MIAA
OGCC Opinion No. 061.
approximately 600 hectares of land,3 including the runways and buildings ("Airport
Lands and Buildings") then under the Bureau of Air Transportation. 4 The MIAA
Charter further provides that no portion of the land transferred to MIAA shall be On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No.
disposed of through sale or any other mode unless specifically approved by the 061. The OGCC pointed out that Section 206 of the Local Government Code requires
President of the Philippines.5 persons exempt from real estate tax to show proof of exemption. The OGCC opined
that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate
tax.
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued
Opinion No. 061. The OGCC opined that the Local Government Code of 1991
withdrew the exemption from real estate tax granted to MIAA under Section 21 of the On 1 October 2001, MIAA filed with the Court of Appeals an original petition for
MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the prohibition and injunction, with prayer for preliminary injunction or temporary
real estate tax imposed by the City. MIAA then paid some of the real estate tax restraining order. The petition sought to restrain the City of Parañaque from imposing
already due. real estate tax on, levying against, and auctioning for public sale the Airport Lands
and Buildings. The petition was docketed as CA-G.R. SP No. 66878.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from
the City of Parañaque for the taxable years 1992 to 2001. MIAA's real estate tax On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it
delinquency is broken down as follows: beyond the 60-day reglementary period. The Court of Appeals also denied on 27
September 2002 MIAA's motion for reconsideration and supplemental motion for
reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for
TAX review.7 TOTAL
TAXABLE YEAR TAX DUE PENALTY
DECLARATION
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 Meanwhile,
30,789,243.20
in January 2003, the City of Parañaque posted notices of auction sale at
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 the Barangay Halls of Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City; in
179,838,904.49
the public market of Barangay La Huerta; and in the main lobby of the Parañaque City argue that a basic rule of statutory construction is that the express mention of one
Hall. The City of Parañaque published the notices in the 3 and 10 January 2003 person, thing, or act excludes all others. An international airport is not among the
issues of the Philippine Daily Inquirer, a newspaper of general circulation in the exceptions mentioned in Section 193 of the Local Government Code. Thus,
Philippines. The notices announced the public auction sale of the Airport Lands and respondents assert that MIAA cannot claim that the Airport Lands and Buildings are
Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative exempt from real estate tax.
Session Hall Building of Parañaque City.
Respondents also cite the ruling of this Court in Mactan International Airport v.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed Marcos8 where we held that the Local Government Code has withdrawn the
before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a exemption from real estate tax granted to international airports. Respondents further
Temporary Restraining Order. The motion sought to restrain respondents — the City argue that since MIAA has already paid some of the real estate tax assessments, it is
of Parañaque, City Mayor of Parañaque, Sangguniang Panglungsod ng Parañaque, now estopped from claiming that the Airport Lands and Buildings are exempt from
City Treasurer of Parañaque, and the City Assessor of Parañaque ("respondents") — real estate tax.
from auctioning the Airport Lands and Buildings.
The Issue
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective
immediately. The Court ordered respondents to cease and desist from selling at This petition raises the threshold issue of whether the Airport Lands and Buildings of
public auction the Airport Lands and Buildings. Respondents received the TRO on the MIAA are exempt from real estate tax under existing laws. If so exempt, then the real
same day that the Court issued it. However, respondents received the TRO only at estate tax assessments issued by the City of Parañaque, and all proceedings taken
1:25 p.m. or three hours after the conclusion of the public auction. pursuant to such assessments, are void. In such event, the other issues raised in this
petition become moot.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the
TRO. The Court's Ruling

On 29 March 2005, the Court heard the parties in oral arguments. In compliance with We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax
the directive issued during the hearing, MIAA, respondent City of Parañaque, and the imposed by local governments.
Solicitor General subsequently submitted their respective Memoranda.
First, MIAA is not a government-owned or controlled corporation but
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and an instrumentality of the National Government and thus exempt from local
Buildings in the name of MIAA. However, MIAA points out that it cannot claim taxation. Second, the real properties of MIAA are owned by the Republic of the
ownership over these properties since the real owner of the Airport Lands and Philippines and thus exempt from real estate tax.
Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to
devote the Airport Lands and Buildings for the benefit of the general public. Since the
Airport Lands and Buildings are devoted to public use and public service, the 1. MIAA is Not a Government-Owned or Controlled Corporation
ownership of these properties remains with the State. The Airport Lands and
Buildings are thus inalienable and are not subject to real estate tax by local Respondents argue that MIAA, being a government-owned or controlled corporation,
governments. 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
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA the Local Government Code withdrew the real estate tax exemption of government-
from the payment of real estate tax. MIAA insists that it is also exempt from real owned or controlled corporations. The deleted phrase appeared in Section 40(a) of
estate tax under Section 234 of the Local Government Code because the Airport the 1974 Real Property Tax Code enumerating the entities exempt from real estate
Lands and Buildings are owned by the Republic. To justify the exemption, MIAA tax.
invokes the principle that the government cannot tax itself. MIAA points out that the
reason for tax exemption of public property is that its taxation would not inure to any There is no dispute that a government-owned or controlled corporation is not exempt
public advantage, since in such a case the tax debtor is also the tax creditor. 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
Respondents invoke Section 193 of the Local Government Code, which expressly 1987 defines a government-owned or controlled corporation as follows:
withdrew the tax exemption privileges of "government-owned and-controlled
corporations" upon the effectivity of the Local Government Code. Respondents also SEC. 2. General Terms Defined. – x x x x
 (13) Government-owned or controlled corporation refers to any income is distributable as dividends to its members, trustees or officers." A non-stock
agency organized as a stock or non-stock corporation, vested with corporation must have members. Even if we assume that the Government is
functions relating to public needs whether governmental or proprietary in considered as the sole member of MIAA, this will not make MIAA a non-stock
nature, and owned by the Government directly or through its corporation. Non-stock corporations cannot distribute any part of their income to their
instrumentalities either wholly, or, where applicable as in the case of stock members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual
corporations, to the extent of at least fifty-one (51) percent of its capital gross operating income to the National Treasury.11 This prevents MIAA from
stock: x x x. (Emphasis supplied) qualifying as a non-stock corporation.

A government-owned or controlled corporation must be "organized as a stock or Section 88 of the Corporation Code provides that non-stock corporations are
non-stock corporation." MIAA is not organized as a stock or non-stock corporation. "organized for charitable, religious, educational, professional, cultural, recreational,
MIAA is not a stock corporation because it has no capital stock divided into fraternal, literary, scientific, social, civil service, or similar purposes, like trade,
shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA industry, agriculture and like chambers." MIAA is not organized for any of these
Charter9 provides: purposes. MIAA, a public utility, is organized to operate an international and domestic
airport for public use.
SECTION 10. Capital. — The capital of the Authority to be contributed by the
National Government shall be increased from Two and One-half Billion Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
(P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to government-owned or controlled corporation. What then is the legal status of MIAA
consist of: within the National Government?

(a) The value of fixed assets including airport facilities, runways and MIAA is a government instrumentality vested with corporate powers to perform
equipment and such other properties, movable and immovable[,] which may efficiently its governmental functions. MIAA is like any other government
be contributed by the National Government or transferred by it from any of instrumentality, the only difference is that MIAA is vested with corporate powers.
its agencies, the valuation of which shall be determined jointly with the Section 2(10) of the Introductory Provisions of the Administrative Code defines a
Department of Budget and Management and the Commission on Audit on government "instrumentality" as follows:
the date of such contribution or transfer after making due allowances for
depreciation and other deductions taking into account the loans and other SEC. 2. General Terms Defined. –– x x x x
liabilities of the Authority at the time of the takeover of the assets and other
properties;
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or
(b) That the amount of P605 million as of December 31, 1986 representing jurisdiction by law, endowed with some if not all corporate powers,
about seventy percentum (70%) of the unremitted share of the National administering special funds, and enjoying operational autonomy, usually
Government from 1983 to 1986 to be remitted to the National Treasury as through a charter. x x x (Emphasis supplied)
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 When the law vests in a government instrumentality corporate powers, the
the General Appropriations Act. 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
Clearly, under its Charter, MIAA does not have capital stock that is divided into powers. Thus, MIAA exercises the governmental powers of eminent domain, 12 police
shares. authority13 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
Section 3 of the Corporation Code10 defines a stock corporation as one whose are not inconsistent with the provisions of this Executive Order." 15
"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 Likewise, when the law makes a government instrumentality operationally
shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a autonomous, the instrumentality remains part of the National Government machinery
stock corporation. 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
MIAA is also not a non-stock corporation because it has no members. Section 87 of operation more "financially viable."17
the Corporation Code defines a non-stock corporation as "one where no part of its
Many government instrumentalities are vested with corporate powers but they do not The reason for the rule does not apply in the case of exemptions running to
become stock or non-stock corporations, which is a necessary condition before an the benefit of the government itself or its agencies. In such case the practical
agency or instrumentality is deemed a government-owned or controlled corporation. effect of an exemption is merely to reduce the amount of money that has to
Examples are the Mactan International Airport Authority, the Philippine Ports be handled by government in the course of its operations. For these
Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these reasons, provisions granting exemptions to government agencies may be
government instrumentalities exercise corporate powers but they are not organized construed liberally, in favor of non tax-liability of such agencies.19
as stock or non-stock corporations as required by Section 2(13) of the Introductory
Provisions of the Administrative Code. These government instrumentalities are There is, moreover, no point in national and local governments taxing each other,
sometimes loosely called government corporate entities. However, they are not unless a sound and compelling policy requires such transfer of public funds from one
government-owned or controlled corporations in the strict sense as understood under government pocket to another.
the Administrative Code, which is the governing law defining the legal relationship
and status of government entities.
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of local
A government instrumentality like MIAA falls under Section 133(o) of the Local governments. The only exception is when the legislature clearly intended to tax
Government Code, which states: government instrumentalities for the delivery of essential public services for
sound and compelling policy considerations. There must be express language in
SEC. 133. Common Limitations on the Taxing Powers of Local Government the law empowering local governments to tax national government instrumentalities.
Units. – Unless otherwise provided herein, the exercise of the taxing Any doubt whether such power exists is resolved against local governments.
powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following: Thus, Section 133 of the Local Government Code states that "unless otherwise
provided" in the Code, local governments cannot tax national government
xxxx instrumentalities. As this Court held in Basco v. Philippine Amusements and
Gaming Corporation:
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalitiesand local government units.(Emphasis and The states have no power by taxation or otherwise, to retard,
underscoring supplied) impede, burden or in any manner control the operation of
constitutional laws enacted by Congress to carry into execution the
Section 133(o) recognizes the basic principle that local governments cannot tax the powers vested in the federal government. (MC Culloch v. Maryland,
national government, which historically merely delegated to local governments the 4 Wheat 316, 4 L Ed. 579)
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 This doctrine emanates from the "supremacy" of the National Government
such guidelines and limitations as the Congress may provide." 18 over local governments.

When local governments invoke the power to tax on national government "Justice Holmes, speaking for the Supreme Court, made reference
instrumentalities, such power is construed strictly against local governments. The rule to the entire absence of power on the part of the States to touch, in
is that a tax is never presumed and there must be clear language in the law imposing that way (taxation) at least, the instrumentalities of the United
the tax. Any doubt whether a person, article or activity is taxable is resolved against States (Johnson v. Maryland, 254 US 51) and it can be agreed
taxation. This rule applies with greater force when local governments seek to tax that no state or political subdivision can regulate a federal
national government instrumentalities. instrumentality in such a way as to prevent it from consummating its
federal responsibilities, or even to seriously burden it in the
Another rule is that a tax exemption is strictly construed against the taxpayer claiming accomplishment of them." (Antieau, Modern Constitutional Law,
the exemption. However, when Congress grants an exemption to a national Vol. 2, p. 140, emphasis supplied)
government instrumentality from local taxation, such exemption is construed liberally
in favor of the national government instrumentality. As this Court declared in Maceda Otherwise, mere creatures of the State can defeat National policies thru
v. Macaraig, Jr.: extermination of what local authorities may perceive to be undesirable
activities or enterprise using the power to tax as "a tool for regulation" (U.S.
v. Sanchez, 340 US 42).
 The power to tax which was called by Justice Marshall as the "power to public indirectly through the taxes they pay the government, or only those among the
destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an public who actually use the road through the toll fees they pay upon using the road.
instrumentality or creation of the very entity which has the inherent power to The tollway system is even a more efficient and equitable manner of taxing the public
wield it. 20 for the maintenance of public roads.

2. Airport Lands and Buildings of MIAA are Owned by the Republic 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
a. Airport Lands and Buildings are of Public Dominion 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
The Airport Lands and Buildings of MIAA are property of public dominion and limitation on the kind of vehicles that can use the road, the speed restrictions and
therefore owned by the State or the Republic of the Philippines. The Civil Code other conditions for the use of the road do not affect the public character of the road.
provides:
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA
ARTICLE 419. Property is either of public dominion or of private ownership. 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
ARTICLE 420. The following things are property of public dominion: 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
(1) Those intended for public use, such as roads, canals, rivers, including those who never use the particular public facility. A user's tax is more
torrents, ports and bridges constructed by the State, banks, shores, equitable — a principle of taxation mandated in the 1987 Constitution.21
roadsteads, and others of similar character;
The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport
(2) Those which belong to the State, without being for public use, and are of the Philippines for both international and domestic air traffic,"22 are properties of
intended for some public service or for the development of the national public dominion because they are intended for public use. As properties of public
wealth. (Emphasis supplied) dominion, they indisputably belong to the State or the Republic of the
Philippines.

ARTICLE 421. All other property of the State, which is not of the character
b. Airport Lands and Buildings are Outside the Commerce of Man
stated in the preceding article, is patrimonial property.

ARTICLE 422. Property of public dominion, when no longer intended for 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
public use or for public service, shall form part of the patrimonial property of
the State. 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
No one can dispute that properties of public dominion mentioned in Article 420 of the devoted to public use are outside the commerce of man, thus:
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 According to article 344 of the Civil Code: "Property for public use in
the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings provinces and in towns comprises the provincial and town roads, the
are properties of public dominion and thus owned by the State or the Republic of the squares, streets, fountains, and public waters, the promenades, and public
Philippines. works of general service supported by said towns or provinces."

The Airport Lands and Buildings are devoted to public use because they are used by The said Plaza Soledad being a promenade for public use, the municipal
the public for international and domestic travel and transportation. The fact that council of Cavite could not in 1907 withdraw or exclude from public use a
the MIAA collects terminal fees and other charges from the public does not remove portion thereof in order to lease it for the sole benefit of the defendant Hilaria
the character of the Airport Lands and Buildings as properties for public use. The Rojas. In leasing a portion of said plaza or public place to the defendant for
operation by the government of a tollway does not change the character of the road private use the plaintiff municipality exceeded its authority in the exercise of
as one for public use. Someone must pay for the maintenance of the road, either the 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 public quarries, public fishponds, working men's village and other
the commerce of man may be the object of a contract, and plazas and improvements for the public benefit.
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 SECTION 88. The tract or tracts of land reserved under the provisions
things that cannot be sold because they are by their very nature of Section eighty-three shall be non-alienable and shall not be subject
outside of commerce are those for public use, such as the plazas, to occupation, entry, sale, lease, or other disposition until again
streets, common lands, rivers, fountains, etc." (Emphasis supplied) 23 declared alienable under the provisions of this Act or by proclamation
of the President. (Emphasis and underscoring supplied)
Again in Espiritu v. Municipal Council, the Court declared that properties of public
dominion are outside the commerce of man: Thus, unless the President issues a proclamation withdrawing the Airport Lands and
Buildings from public use, these properties remain properties of public dominion and
xxx Town plazas are properties of public dominion, to be devoted to are inalienable. Since the Airport Lands and Buildings are inalienable in their present
public use and to be made available to the public in general. They status as properties of public dominion, they are not subject to levy on execution or
are outside the commerce of man and cannot be disposed of or even foreclosure sale. As long as the Airport Lands and Buildings are reserved for public
leased by the municipality to private parties. While in case of war or during use, their ownership remains with the State or the Republic of the Philippines.
an emergency, town plazas may be occupied temporarily by private
individuals, as was done and as was tolerated by the Municipality of The authority of the President to reserve lands of the public domain for public use,
Pozorrubio, when the emergency has ceased, said temporary occupation or and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III
use must also cease, and the town officials should see to it that the town of the Administrative Code of 1987, which states:
plazas should ever be kept open to the public and free from encumbrances
or illegal private constructions.24 (Emphasis supplied)
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the
Government. — (1) The President shall have the power to reserve for
The Court has also ruled that property of public dominion, being outside the settlement or public use, and for specific public purposes, any of the
commerce of man, cannot be the subject of an auction sale.25 lands of the public domain, the use of which is not otherwise directed
by law. The reserved land shall thereafter remain subject to the specific
Properties of public dominion, being for public use, are not subject to levy, public purpose indicated until otherwise provided by law or
encumbrance or disposition through public or private sale. Any encumbrance, levy on proclamation;
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 x x x x. (Emphasis supplied)
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. 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.
Before MIAA can encumber26 the Airport Lands and Buildings, the President must
first withdraw from public usethe Airport Lands and Buildings. Sections 83 and 88
of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the c. MIAA is a Mere Trustee of the Republic
existing general law governing the classification and disposition of lands of the public
domain other than timber and mineral lands,"27 provide: 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
SECTION 83. Upon the recommendation of the Secretary of Agriculture and instrumentalities like MIAA to hold title to real properties owned by the
Natural Resources, the President may designate by proclamation any tract Republic, thus:
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 SEC. 48. Official Authorized to Convey Real Property. — Whenever real
thereof, in accordance with regulations prescribed for this purposes, or for property of the Government is authorized by law to be conveyed, the deed of
quasi-public uses or purposes when the public interest requires it, including conveyance shall be executed in behalf of the government by the following:
reservations for highways, rights of way for railroads, hydraulic power sites,
irrigation systems, communal pastures or lequas communales, public parks,
 (1) For property belonging to and titled in the name of the Republic of the The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the
Philippines, by the President, unless the authority therefor is expressly Republic receiving cash, promissory notes or even stock since MIAA is not a stock
vested by law in another officer. corporation.

(2) For property belonging to the Republic of the Philippines but titled The whereas clauses of the MIAA Charter explain the rationale for the transfer of the
in the name of any political subdivision or of any corporate agency or Airport Lands and Buildings to MIAA, thus:
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied) WHEREAS, the Manila International Airport as the principal airport of the
Philippines for both international and domestic air traffic, is required to
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is provide standards of airport accommodation and service comparable with
clearer because even its executive head cannot sign the deed of conveyance on the best airports in the world;
behalf of the Republic. Only the President of the Republic can sign such deed of
conveyance.28 WHEREAS, domestic and other terminals, general aviation and other
facilities, have to be upgraded to meet the current and future air traffic and
d. Transfer to MIAA was Meant to Implement a Reorganization other demands of aviation in Metro Manila;

The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands WHEREAS, a management and organization study has indicated that the
and Buildings from the Bureau of Air Transportation of the Department of objectives of providing high standards of accommodation and service
Transportation and Communications. The MIAA Charter provides: within the context of a financially viable operation, will best be
achieved by a separate and autonomous body; and
SECTION 3. Creation of the Manila International Airport Authority. — x x x x
WHEREAS, under Presidential Decree No. 1416, as amended by
The land where the Airport is presently located as well as the Presidential Decree No. 1772, the President of the Philippines is given
surrounding land area of approximately six hundred hectares, are continuing authority to reorganize the National Government, which
hereby transferred, conveyed and assigned to the ownership and authority includes the creation of new entities, agencies and
administration of the Authority, subject to existing rights, if any. The instrumentalities of the Government[.] (Emphasis supplied)
Bureau of Lands and other appropriate government agencies shall
undertake an actual survey of the area transferred within one year from the The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation
promulgation of this Executive Order and the corresponding title to be issued to MIAA was not meant to transfer beneficial ownership of these assets from the
in the name of the Authority. Any portion thereof shall not be disposed Republic to MIAA. The purpose was merely to reorganize a division in the Bureau
through sale or through any other mode unless specifically approved of Air Transportation into a separate and autonomous body. The Republic
by the President of the Philippines. (Emphasis supplied) 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
SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All adverse to the Republic.
existing public airport facilities, runways, lands, buildings and other
property, movable or immovable, belonging to the Airport, and all assets, The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not
powers, rights, interests and privileges belonging to the Bureau of Air be disposed through sale or through any other mode unless specifically
Transportation relating to airport works or air operations, including all approved by the President of the Philippines." This only means that the Republic
equipment which are necessary for the operation of crash fire and rescue retained the beneficial ownership of the Airport Lands and Buildings because under
facilities, are hereby transferred to the Authority. (Emphasis supplied) 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
SECTION 25. Abolition of the Manila International Airport as a Division in the the Airport Lands and Buildings.
Bureau of Air Transportation and Transitory Provisions. — The Manila
International Airport including the Manila Domestic Airport as a division At any time, the President can transfer back to the Republic title to the Airport Lands
under the Bureau of Air Transportation is hereby abolished. 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
x x x x.
disposition of the Airport Lands and Buildings. This only confirms that the Airport Accordingly, we hold that the portions of the land leased to private entities as
Lands and Buildings belong to the Republic. 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
e. Real Property Owned by the Republic is Not Taxable 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
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: 3. Refutation of Arguments of Minority

SEC. 234. Exemptions from Real Property Tax. — The following are The minority asserts that the MIAA is not exempt from real estate tax because
exempted from payment of the real property tax: 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:
(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; 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,
x x x. (Emphasis supplied) including government-owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and
This exemption should be read in relation with Section 133(o) of the same Code, non-profit hospitals and educational institutions are hereby withdrawn upon
which prohibits local governments from imposing "[t]axes, fees or charges of any kind effectivity of this Code. (Emphasis supplied)
on the National Government, its agencies and instrumentalitiesx x x." The real
properties owned by the Republic are titled either in the name of the Republic itself or The minority states that MIAA is indisputably a juridical person. The minority argues
in the name of agencies or instrumentalities of the National Government. The that since the Local Government Code withdrew the tax exemption of all juridical
Administrative Code allows real property owned by the Republic to be titled in the persons, then MIAA is not exempt from real estate tax. Thus, the minority declares:
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. 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
The Republic may grant the beneficial use of its real property to an agency or that the withdrawal of realty tax exemption applies to all persons. The
instrumentality of the national government. This happens when title of the real reference to or the inclusion of GOCCs is only clarificatory or illustrative of
property is transferred to an agency or instrumentality even as the Republic remains the explicit provision.
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 The term "All persons" encompasses the two classes of persons
been granted, for consideration or otherwise, to a taxable person." MIAA, as a recognized under our laws, natural and juridical persons. Obviously,
government instrumentality, is not a taxable person under Section 133(o) of the Local MIAA is not a natural person. Thus, the determinative test is not just
Government Code. Thus, even if we assume that the Republic has granted to MIAA whether MIAA is a GOCC, but whether MIAA is a juridical person at all.
the beneficial use of the Airport Lands and Buildings, such fact does not make these (Emphasis and underscoring in the original)
real properties subject to real estate tax.
The minority posits that the "determinative test" whether MIAA is exempt from local
However, portions of the Airport Lands and Buildings that MIAA leases to private taxation is its status — whether MIAA is a juridical person or not. The minority also
entities are not exempt from real estate tax. For example, the land area occupied by insists that "Sections 193 and 234 may be examined in isolation from Section 133(o)
hangars that MIAA leases to private corporations is subject to real estate tax. In such to ascertain MIAA's claim of exemption."
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 The argument of the minority is fatally flawed. Section 193 of the Local Government
Center of the Philippines v. Quezon City, the Court ruled: 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 Development Authority,32 Fisheries Development Authority,33 Bases Conversion
133(o) states: Development Authority,34Philippine Ports Authority,35 Cagayan de Oro Port
Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine
SEC. 133. Common Limitations on the Taxing Powers of Local Government National Railways.39
Units. – Unless otherwise provided herein, the exercise of the taxing powers
of provinces, cities, municipalities, and barangays shall not extend to the The minority's theory violates Section 133(o) of the Local Government Code which
levy of the following: expressly prohibits local governments from imposing any kind of tax on national
government instrumentalities. Section 133(o) does not distinguish between national
xxxx 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
(o) Taxes, fees or charges of any kinds on the National Government, its determinative test whether MIAA is exempt from local taxation is not whether MIAA is
agencies and instrumentalities, and local government units. (Emphasis and a juridical person, but whether it is a national government instrumentality under
underscoring supplied) 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
By express mandate of the Local Government Code, local governments cannot national government, its agencies and instrumentalities.
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 Section 133 of the Local Government Code starts with the saving clause "[u]nless
instrumentalities. The taxing powers of local governments do not extend to the otherwise provided in this Code." This means that unless the Local Government Code
national government, its agencies and instrumentalities, "[u]nless otherwise provided grants an express authorization, local governments have no power to tax the national
in this Code" as stated in the saving clause of Section 133. The saving clause refers government, its agencies and instrumentalities. Clearly, the rule is local governments
to Section 234(a) on the exception to the exemption from real estate tax of real have no power to tax the national government, its agencies and instrumentalities. As
property owned by the Republic. an exception to this rule, local governments may tax the national government, its
agencies and instrumentalities only if the Local Government Code expressly so
The minority, however, theorizes that unless exempted in Section 193 itself, all provides.
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 The saving clause in Section 133 refers to the exception to the exemption in Section
specifically enumerated as exempt in Section 193. Thus, the minority states: 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
x x x Under Section 193, the exemption is limited to (a) local water districts; 234(a) of the Local Government Code provides:
(b) cooperatives duly registered under Republic Act No. 6938; and (c) non-
stock and non-profit hospitals and educational institutions. It would be SEC. 234. Exemptions from Real Property Tax – The following are
belaboring the obvious why the MIAA does not fall within any of the exempt exempted from payment of the real property tax:
entities under Section 193. (Emphasis supplied)
(a) Real property owned by the Republic of the Philippines or any of its
The minority's theory directly contradicts and completely negates Section 133(o) of political subdivisions except when the beneficial use thereof has been
the Local Government Code. This theory will result in gross absurdities. It will make granted, for consideration or otherwise, to a taxable person.
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 x x x. (Emphasis supplied)
kind of local tax, and not only real estate tax, on the national government.
Under Section 234(a), real property owned by the Republic is exempt from real estate
Under the minority's theory, many national government instrumentalities with juridical tax. The exception to this exemption is when the government gives the beneficial use
personalities will also be subject to any kind of local tax, and not only real estate tax. of the real property to a taxable entity.
Some of the national government instrumentalities vested by law with juridical
personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research The exception to the exemption in Section 234(a) is the only instance when the
Institute,31Laguna Lake 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 pursuant to the saving clause in Section 133 stating "[u]nless otherwise provided in
real property, although owned by the Republic, is not devoted to public use or public this Code." This exception — which is an exception to the exemption of the Republic
service but devoted to the private gain of a taxable person. 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
The minority also argues that since Section 133 precedes Section 193 and 234 of the by the Republic, whether titled in the name of the national government, its agencies
Local Government Code, the later provisions prevail over Section 133. Thus, the or instrumentalities, to real estate tax if the beneficial use of such property is given to
minority asserts: a taxable entity.

x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. The minority also claims that the definition in the Administrative Code of the phrase
Following an accepted rule of construction, in case of conflict the "government-owned or controlled corporation" is not controlling. The minority points
subsequent provisions should prevail. Therefore, MIAA, as a juridical out that Section 2 of the Introductory Provisions of the Administrative Code admits
person, is subject to real property taxes, the general exemptions attaching to that its definitions are not controlling when it provides:
instrumentalities under Section 133(o) of the Local Government Code being
qualified by Sections 193 and 234 of the same law. (Emphasis supplied) 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
The minority assumes that there is an irreconcilable conflict between Section 133 on meaning:
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 presenteda persuasive argument that there is xxxx
such a conflict. The minority's assumption of an irreconcilable conflict in the statutory
provisions is an egregious error for two reasons. The minority then concludes that reliance on the Administrative Code definition is
"flawed."
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 The minority's argument is a non sequitur. True, Section 2 of the Administrative Code
193 states "[u]nless otherwise provided in this Code." By its own words, Section 193 recognizes that a statute may require a different meaning than that defined in the
admits the superiority of other provisions of the Local Government Code that limit the Administrative Code. However, this does not automatically mean that the definition in
exercise of the taxing power in Section 193. When a provision of law grants a power the Administrative Code does not apply to the Local Government Code. Section 2 of
but withholds such power on certain matters, there is no conflict between the grant of the Administrative Code clearly states that "unless the specific words x x x of a
power and the withholding of power. The grantee of the power simply cannot exercise particular statute shall require a different meaning," the definition in Section 2 of the
the power on matters withheld from its power. Administrative Code shall apply. Thus, unless there is specific language in the Local
Government Code defining the phrase "government-owned or controlled corporation"
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local differently from the definition in the Administrative Code, the definition in the
Government Units." Section 133 limits the grant to local governments of the power to Administrative Code prevails.
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 The minority does not point to any provision in the Local Government Code defining
tax on the national government, its agencies and instrumentalities. There is no clearer the phrase "government-owned or controlled corporation" differently from the
limitation on the taxing power than this. 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
Since Section 133 prescribes the "common limitations" on the taxing powers of local corporation." The Administrative Code, however, expressly defines the phrase
governments, Section 133 logically prevails over Section 193 which grants local "government-owned or controlled corporation." The inescapable conclusion is that the
governments such taxing powers. By their very meaning and purpose, the "common Administrative Code definition of the phrase "government-owned or controlled
limitations" on the taxing power prevail over the grant or exercise of the taxing power. corporation" applies to the Local Government Code.
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 The third whereas clause of the Administrative Code states that the Code
tax on the national government, its agencies and instrumentalities — a gross "incorporates in a unified document the major structural, functional and procedural
absurdity. principles and rules of governance." Thus, the Administrative Code is the governing
law defining the status and relationship of government departments, bureaus, offices,
Local governments have no power to tax the national government, its agencies and agencies and instrumentalities. Unless a statute expressly provides for a different
instrumentalities, except as otherwise provided in the Local Government Code
status and relationship for a specific government unit or entity, the provisions of the SECTION 7. Authorized Capital Stock – Par value. — The capital stock of
Administrative Code prevail. 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
The minority also contends that the phrase "government-owned or controlled subscription by the National Government. Upon the effectivity of this Charter,
corporation" should apply only to corporations organized under the Corporation Code, the National Government shall subscribe to Twenty-Five Million common
the general incorporation law, and not to corporations created by special charters. shares of stock worth Two Billion Five Hundred Million which shall be
The minority sees no reason why government corporations with special charters deemed paid for by the Government with the net asset values of the Bank
should have a capital stock. Thus, the minority declares: remaining after the transfer of assets and liabilities as provided in Section 30
hereof. (Emphasis supplied)
I submit that the definition of "government-owned or controlled corporations"
under the Administrative Code refer to those corporations owned by the Other government-owned corporations organized as stock corporations under their
government or its instrumentalities which are created not by legislative special charters are the Philippine Crop Insurance Corporation, 42 Philippine
enactment, but formed and organized under the Corporation Code through International Trading Corporation,43 and the Philippine National Bank44 before it was
registration with the Securities and Exchange Commission. In short, these reorganized as a stock corporation under the Corporation Code. All these
are GOCCs without original charters. 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
xxxx 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
It might as well be worth pointing out that there is no point in requiring a real estate tax.
capital structure for GOCCs whose full ownership is limited by its charter to
the State or Republic. Such GOCCs are not empowered to declare Third, the government-owned or controlled corporations created through special
dividends or alienate their capital shares. 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
The contention of the minority is seriously flawed. It is not in accord with the corporation must be established for the common good. The second condition is that
Constitution and existing legislations. It will also result in gross absurdities. the government-owned or controlled corporation must meet the test of economic
viability. Section 16, Article XII of the 1987 Constitution provides:
First, the Administrative Code definition of the phrase "government-owned or
controlled corporation" does not distinguish between one incorporated under the SEC. 16. The Congress shall not, except by general law, provide for the
Corporation Code or under a special charter. Where the law does not distinguish, formation, organization, or regulation of private corporations. Government-
courts should not distinguish. 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
Second, Congress has created through special charters several government-owned economic viability. (Emphasis and underscoring supplied)
corporations organized as stock corporations. Prime examples are the Land Bank of
the Philippines and the Development Bank of the Philippines. The special charter40 of The Constitution expressly authorizes the legislature to create "government-owned or
the Land Bank of the Philippines provides: 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,
SECTION 81. Capital. — The authorized capital stock of the Bank shall be Congress has no power to create government-owned or controlled corporations with
nine billion pesos, divided into seven hundred and eighty million common special charters unless they are made to comply with the two conditions of common
shares with a par value of ten pesos each, which shall be fully subscribed by good and economic viability. The test of economic viability applies only to
the Government, and one hundred and twenty million preferred shares with government-owned or controlled corporations that perform economic or commercial
a par value of ten pesos each, which shall be issued in accordance with the activities and need to compete in the market place. Being essentially economic
provisions of Sections seventy-seven and eighty-three of this Code. vehicles of the State for the common good — meaning for economic development
(Emphasis supplied) purposes — these government-owned or controlled corporations with special charters
are usually organized as stock corporations just like ordinary private corporations.

Likewise, the special charter41 of the Development Bank of the Philippines provides:
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 Father Joaquin G. Bernas, a leading member of the Constitutional Commission,
instrumentalities need not be economically viable since the government may even explains in his textbook The 1987 Constitution of the Republic of the Philippines: A
subsidize their entire operations. These instrumentalities are not the "government- Commentary:
owned or controlled corporations" referred to in Section 16, Article XII of the 1987
Constitution. The second sentence was added by the 1986 Constitutional Commission.
The significant addition, however, is the phrase "in the interest of the
Thus, the Constitution imposes no limitation when the legislature creates government common good and subject to the test of economic viability." The addition
instrumentalities vested with corporate powers but performing essential governmental includes the ideas that they must show capacity to function efficiently in
or public functions. Congress has plenary authority to create government business and that they should not go into activities which the private sector
instrumentalities vested with corporate powers provided these instrumentalities can do better. Moreover, economic viability is more than financial viability but
perform essential government functions or public services. However, when the also includes capability to make profit and generate benefits not quantifiable
legislature creates through special charters corporations that perform economic or in financial terms.46(Emphasis supplied)
commercial activities, such entities — known as "government-owned or controlled
corporations" — must meet the test of economic viability because they compete in the Clearly, the test of economic viability does not apply to government entities vested
market place. with corporate powers and performing essential public services. The State is
obligated to render essential public services regardless of the economic viability of
This is the situation of the Land Bank of the Philippines and the Development Bank of providing such service. The non-economic viability of rendering such essential public
the Philippines and similar government-owned or controlled corporations, which service does not excuse the State from withholding such essential services from the
derive their income to meet operating expenses solely from commercial transactions public.
in competition with the private sector. The intent of the Constitution is to prevent the
creation of government-owned or controlled corporations that cannot survive on their However, government-owned or controlled corporations with special charters,
own in the market place and thus merely drain the public coffers. organized essentially for economic or commercial objectives, must meet the test of
economic viability. These are the government-owned or controlled corporations that
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to are usually organized under their special charters as stock corporations, like the Land
the Constitutional Commission the purpose of this test, as follows: Bank of the Philippines and the Development Bank of the Philippines. These are the
government-owned or controlled corporations, along with government-owned or
MR. OPLE: Madam President, the reason for this concern is really that when controlled corporations organized under the Corporation Code, that fall under the
the government creates a corporation, there is a sense in which this definition of "government-owned or controlled corporations" in Section 2(10) of the
corporation becomes exempt from the test of economic performance. We Administrative Code.
know what happened in the past. If a government corporation loses, then it
makes its claim upon the taxpayers' money through new equity infusions The MIAA need not meet the test of economic viability because the legislature did not
from the government and what is always invoked is the common good. That create MIAA to compete in the market place. MIAA does not compete in the market
is the reason why this year, out of a budget of P115 billion for the entire place because there is no competing international airport operated by the private
government, about P28 billion of this will go into equity infusions to support a sector. MIAA performs an essential public service as the primary domestic and
few government financial institutions. And this is all taxpayers' money which international airport of the Philippines. The operation of an international airport
could have been relocated to agrarian reform, to social services like health requires the presence of personnel from the following government agencies:
and education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain. 1. The Bureau of Immigration and Deportation, to document the arrival and
departure of passengers, screening out those without visas or travel
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together documents, or those with hold departure orders;
with the "common good," this becomes a restraint on future enthusiasts for
state capitalism to excuse themselves from the responsibility of meeting the 2. The Bureau of Customs, to collect import duties or enforce the ban on
market test so that they become viable. And so, Madam President, I prohibited importations;
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 3. The quarantine office of the Department of Health, to enforce health
common good.45 measures against the spread of infectious diseases into the country;
 4. The Department of Agriculture, to enforce measures against the spread of what constitutes a "government-owned or controlled corporation." To belittle this
plant and animal diseases into the country; phrase as "clarificatory or illustrative" is grave error.

5. The Aviation Security Command of the Philippine National Police, to To summarize, MIAA is not a government-owned or controlled corporation under
prevent the entry of terrorists and the escape of criminals, as well as to Section 2(13) of the Introductory Provisions of the Administrative Code because it is
secure the airport premises from terrorist attack or seizure; 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
6. The Air Traffic Office of the Department of Transportation and because MIAA is not required to meet the test of economic viability. MIAA is a
Communications, to authorize aircraft to enter or leave Philippine airspace, government instrumentality vested with corporate powers and performing essential
as well as to land on, or take off from, the airport; and 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
7. The MIAA, to provide the proper premises — such as runway and Code. The exception to the exemption in Section 234(a) does not apply to MIAA
buildings — for the government personnel, passengers, and airlines, and to because MIAA is not a taxable entity under the Local Government Code. Such
manage the airport operations. exception applies only if the beneficial use of real property owned by the Republic is
given to a taxable entity.
All these agencies of government perform government functions essential to the
operation of an international airport. 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
MIAA performs an essential public service that every modern State must provide its by the State or the Republic. Article 420 of the Civil Code provides:
citizens. MIAA derives its revenues principally from the mandatory fees and charges
MIAA imposes on passengers and airlines. The terminal fees that MIAA charges Art. 420. The following things are property of public dominion:
every passenger are regulatory or administrative fees 47 and not income from
commercial transactions.
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and
MIAA falls under the definition of a government instrumentality under Section 2(10) of others of similar character;
the Introductory Provisions of the Administrative Code, which provides:
(2) Those which belong to the State, without being for public use, and are
SEC. 2. General Terms Defined. – x x x x intended for some public service or for the development of the national
wealth. (Emphasis supplied)
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or The term "ports x x x constructed by the State" includes airports and seaports. The
jurisdiction by law, endowed with some if not all corporate powers, Airport Lands and Buildings of MIAA are intended for public use, and at the very least
administering special funds, and enjoying operational autonomy, usually intended for public service. Whether intended for public use or public service, the
through a charter. x x x (Emphasis supplied) 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
The fact alone that MIAA is endowed with corporate powers does not make MIAA a exempt from real estate tax under Section 234(a) of the Local Government Code.
government-owned or controlled corporation. Without a change in its capital structure,
MIAA remains a government instrumentality under Section 2(10) of the Introductory 4. Conclusion
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 Under Section 2(10) and (13) of the Introductory Provisions of the Administrative
corporations" under Section 16, Article XII of the 1987 Constitution. 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
The minority belittles the use in the Local Government Code of the phrase Local Government Code, MIAA as a government instrumentality is not a taxable
"government-owned or controlled corporation" as merely "clarificatory or illustrative." person because it is not subject to "[t]axes, fees or charges of any kind" by local
This is fatal. The 1987 Constitution prescribes explicit conditions for the creation of governments. The only exception is when MIAA leases its real property to a "taxable
"government-owned or controlled corporations." The Administrative Code defines
 6
person" as provided in Section 234(a) of the Local Government Code, in which case Rollo, pp. 22-23.
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 7 Under Rule 45 of the 1997 Rules of Civil Procedure.
parties are subject to real estate tax by the City of Parañaque.
8 330 Phil. 392 (1996).
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 9
or the Republic of the Philippines. Article 420 specifically mentions "ports x x x MIAA Charter as amended by Executive Order No. 298. See note 2.
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 10 Batas Pambansa Blg. 68.
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 11 Section 11 of the MIAA Charter provides:
Government Code. This Court has also repeatedly ruled that properties of public
dominion are not subject to execution or foreclosure sale.
Contribution to the General Fund for the Maintenance and
Operation of other Airports. – Within thirty (30) days after the close
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of
of each quarter, twenty percentum (20%) of the gross operating
the Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. income, excluding payments for utilities of tenants and
66878. We DECLARE the Airport Lands and Buildings of the Manila International concessionaires and terminal fee collections, shall be remitted to
Airport Authority EXEMPT from the real estate tax imposed by the City of Parañaque.
the General Fund in the National Treasury to be used for the
We declare VOID all the real estate tax assessments, including the final notices of
maintenance and operation of other international and domestic
real estate tax delinquencies, issued by the City of Parañaque on the Airport Lands airports in the country. Adjustments in the amount paid by the
and Buildings of the Manila International Airport Authority, except for the portions that Authority to the National Treasury under this Section shall be made
the Manila International Airport Authority has leased to private parties. We also at the end of each year based on the audited financial statements
declare VOID the assailed auction sale, and all its effects, of the Airport Lands and of the Authority.
Buildings of the Manila International Airport Authority.
12 Section 5(j), MIAA Charter.
No costs.
13 Section 6, MIAA Charter.
SO ORDERED.
14 Section 5(k), MIAA Charter.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-
Martinez, Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario,
15
Garcia, Velasco, Jr., J.J., concur. Section 5(o), MIAA Charter.

16
Footnotes Third Whereas Clause, MIAA Charter.

17
1 Dated 16 September 1983. Id.

18
2 Dated 26 July 1987. Constitution, Art. X, Sec. 5.

19
3 Section 3, MIAA Charter. 274 Phil. 1060, 1100 (1991) quoting C. Dallas Sands, 3 Statutes and
Statutory Construction 207.
4 Section 22, MIAA Charter.
20 274 Phil. 323, 339-340 (1991).
5 Section 3, MIAA Charter.
21 Constitution, Art. VI, Sec. 28(1).
22 43
First Whereas Clause, MIAA Charter. Presidential Decree No. 252, 21 July 1973, as amended by Presidential
Decree No. 1071, 25 January 1977 and Executive Order No. 1067, 25
23 30 Phil. 602, 606-607 (1915). November 1985.

44
24 102 Phil. 866, 869-870 (1958). Executive Order No. 80, 3 December 1986.

45
25PNB v. Puruganan, 130 Phil. 498 (1968). See also Martinez v. CA, 155 III Records, Constitutional Commission 63 (22 August 1986).
Phil. 591 (1974).
46 2003 ed., 1181.
26 MIAA Charter, Sec.16.
47Manila International Airport Authority v. Airspan Corporation, G.R. No.
27
Chavez v. Public Estates Authority, 433 Phil. 506 (2002). 157581, 1 December 2004, 445 SCRA 471.

28 Section 3, MIAA Charter.

29 G.R. No. 144104, 29 June 2004, 433 SCRA 119, 138.

30 Republic Act No. 7653, 14 June 1993, Sec. 5.

31 Executive Order No. 1061, 5 November 1985, Sec. 3(p).

32 Republic Act No. 4850, 18 July 1966, Sec. 5.

33 Presidential Decree No. 977, 11 August 1976, Section 4(j).

34 Republic Act No. 7227, 13 March 1992, Sec. 3.

35 Presidential Decree No. 857, 23 December 1975, Sec. 6(b)(xvi).

36 Republic Act No. 4663, 18 June 1966, Sec. 7(m).

37 Republic Act No. 4567, 19 June 1965, Sec. 7(m).

38 Republic Act No. 7621, 26 June 1992, Sec. 7(m).

39 Republic Act No. 4156, 20 June 1964. Section 4(b).

40Republic Act No. 3844, 8 August 1963, as amended by Republic Act No.
7907, 23 February 1995.

41 Executive Order No. 81, 3 December 1986.

42 Republic Act No. 8175, 29 December 1995.