Manila International Airport Authority vs.

CA and City of Paranaque

CONCISE Summary
MIAA is NOT a taxable entity because it is NOT a GOCC. It is not a GOCC
because it is not a stock or non-stock corporation as defined by the
Administrative Code and it is not a GOCC because it does not have to pass
the test of economic viability as required under Section 16, Article XII of
the 1987 Constitution because it is subsidized by the National
Government.
MIAA is an INSTRUMENTALITY since it is vested with corporate powers AND
performs essential public services pursuant to Section 2(10) of the
Introductory Provisions of the Administrative Code.
Since it is an INSTRUMENTALITY, it is exempt from the taxing powers of
the Local Government Units as per Section 133 (o) of the Local
Government.
The Airport Lands and Buildings are not taxable properties nor can it be
auctioned of because it is public dominion and outside the commerce of
man (meaning it cant be bought or sold) as per Article 420 of the Civil
Code. Only the President can sell or encumber these lands. The only way it
can be subject to tax is when these Lands are leased to taxable entities
for their beneficial use.

REAL SUMMARY with the all the needed Details

FACTS

Manila International Airport Authority (MIAA) operates NAIA in Paranaque City

under Executive Order 903 (Revised Charter of the MIAA) issued on July 21,
1983 by Pres. Marcos, as amended by EO909 and 298. NAIA Complex consists
of 600 hectares of land
On March 21, 1997, the OGCC issued Opinion No. 61 that the LGC withdrew
the tax exemption granted by the MIAA Charter to MIAA (The start of the
whole controversy)
MIAA then paid real estate tax that were already due but still received Final
Notices of Real Estate Tax Delinquency from the City of Paranaque
demanding the rest of the real estate taxes due.
On July 17, 2001, the City wanted to levy the Airport Land and Buildings
(Lands) to satisfy the real estate taxes overdue and sell the Lands in a public
auction
MIAA sought a clarification of OGCC Opinion No. 61 and on August 9, 2001,
the OGCC issued Opinion No. 147 clarifying 61 saying that the MIAA Charter
sec. 21 exempts MIAA from real estate tax, taking back what it said in
Opinion No. 61

On October 1, 2001, MIAA filed with the CA a petition to stop the City from
imposing real estate tax and selling the Lands through a public auction.
On January 2003, the City already posted notices in public areas that it was
going to sell the Lands on February 7, 2003, 10am. MIAA filed to the SC an
Urgent Ex-Parte and Reitatory Motion for the Issuance of a Temporary
Restraining Order.
On February 7, 2003 (the day of the auction), SC was going to send the TRO
but it was 3 hours late and the Lands were already sold in the Public Auction
ISSUE

Whether or not MIAA and the Airport Lands and Buildings are exempt from real
estate tax

CONTENTIONS
MIAA contends:

The Lands are owned by the Republic of the Philippines and NOT the MIAA.
Lands are devoted to public use and therefore owned by the State and
INALIENABLE lands
Sec. 234 of the LGC exempts lands owned by the RP
Sec. 21 of the MIAA Charter specifically exempts MIAA from real estate tax

City contends:

Sec. 193 of the LGC expressly withdrew tax exemptions privileges of GOCCs
(Its saying that MIAA is a GOCC)
An airport is also not mentioned in the exemptions enumerated by Sec. 193
In Mactan International Airport vs. Marcos, the LGC withdrew tax exemptions
granted to international airports
RULINGS

MIAA is NOT a GOCC but an INSTRUMENTALITY and it IS EXEMPT from local taxation
MIAA is not a GOCC
City Contends that the MIAA is a GOCC and NOT exempt from real estate tax
since sec. 234 (e) of the LGC withdraw the tax exemptions of GOCCs:
Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or controlled corporations are hereby
withdrawn upon the effectivity of this Code.
1. MIAA is NOT a GOCC because a GOCC is a non-stock or a stock Corporation as
defined by Sec. 2(13) of the Introductory Provisions of the Administrative
Code of 1987.

a. What is a stock corporation?

i. A corporation whose capital stock is divided into shares and
authorized to distribute to the holders of such shares dividends
b. What is a Non-stock corporation?
i. A corporation where no part of its income is distributable as
dividends to its members, trustees or officers. A non-stock
corporation has to have members
MIAA is NOT a stock corporation because its capital is not divided into
shares as per sec. 10 of MIAA Charter
MIAA is NOT a non-stock corporation does not have members and it is
required to remit 20% of its annual gross operating income to the
National Treasury which also disqualifies it as a non-stock corporation
2. MIAA is NOT a GOCC because a GOCC has to meet a test of economic viability
under Sec. 16, Article XII of the 1987 Constitution. (Note: in the full text, this
will be discussed in the later part but I decided to place it here for the sake of
organizing the summary)
a. A GOCC created through special charters must meet two conditions:
i. Established for the common good
ii. Economically viable to be able to compete in the market place
MIAA may have been established for the common good but it does not
need to pass the test of economic viability because it is subsidized by
the government and does not need to compete in the market place

MIAA is an INSTRUMENTALITY
As per Section 2 (10) of the Admin Code:
Instrumentality refers to any agency of the National Government, not
integrated within the department framework vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered institutions
and government-owned or controlled corporations.
MIAA is endowed with corporate powers to perform efficiently. It also has all the
inherent powers of Taxation, police power, and eminent domain. MIAA is also
operationally autonomous in the sense that it remains part of the national
government but operates outside the department framework (department
meaning the three branches of government? Not sure here)

Instrumentalities are EXEMPT from the TAXING POWERS OF THE LOCAL

GOVERNMENT UNITS
As per Section 133 (o) of the LGC:

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:
(o) Taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities, and local government units.

This is pursuant to the basic principle that the local government cannot tax
the national government lest it violates the latters supremacy even though
the local government may be given the authority to tax by the 1987
Constitution.
The only exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential public services for
the sound and compelling policy considerations.
AIRPORT LANDS AND BUILDINGS are OWNED by the REPUBLIC OF THE PHILIPPINES
and EXEMPT from real estate tax and cannot be sold in a public auction

Airport Lands and Buildings are PUBLIC DOMINION and therefore OUTSIDE
THE COMMERCE OF MAN (cant sell it in a public auction)
As per Article 420 of the Civil Code:
The following things are property of public dominion:
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
The test for whether or not a property is public dominion is when its intended
use is for public use, not if it charges fees.
The Lands are devoted to public use for international and domestic travel and
transportation. It is used by and for the public and is therefore public
dominion under ports since airports are considered as such.
The MIAA Charter also states that MIAA is the principal airport of the
Philippines for both international and domestic air traffic. Thus, MIAA is public
dominion and OWNED BY THE RP.
As public dominion, it is OUTSIDE THE COMMERCE OF MAN (as ruled in
Municipality of Cavite vs. Rojas and Espiritu v. Municipal Council)
o which means that it cannot be subject to levy, encumbrance or
disposition through public or private sale (including public auction).
If public dominion will become subject to such, then public service will
stop.
Only the PRESIDENT can encumber or dispose of the Airport Lands
because they belong to the RP. WHY?

 BECAUSE it is part of PUBLIC DOMAIN

o As per Sections 83 and 88 of the Public Land Law (CA No. 141), only
the president can encumber public domain by first withdrawing it from
public use. These lands are NON-ALIENABLE until again declared
alienable under the provisions of this Act or by proclamation of the
President. This is also reiterated in Section 14, Chapter 4, Title 1, Book
III of the Administrative Code of 1987.
BECAUSE it is an INSTRUMENTALITY
o MIAA does not actually hold the Airport Lands as its own since it is an
instrumentality. The Land is titled under the MIAA but the property
actually belongs to the RP as per Section 48, Chapter 12, Book I of the
Admin Code.
BECAUSE it is stated in the MIAA Charter
o As per the section 3, of the MIAA Charter, any portion of the land
disposed through sale or through any other mode must be specifically
approved by the President.

Airport Lands cannot be taxed since they are real property owned by the
RP
As per Section 234 (a) of the LGC, real property owned by the Republic of the
Philippines are outside the taxing powers of the local government units:
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;
The General rule regarding real property owned by the Republic of the
Philippines is that it is EXEMPT FROM TAX
The exception is when these real properties where transferred to a TAXABLE
PERSON for the BENEFICIAL USE OF IT.
In the case of MIAA, it does not fall under the exception since MIAA is NOT A
TAXABLE PERSON (being a instrumentality, it is exempt from tax under
Section 133 (o)
MIAA does NOT have title over the Airport Lands for the BENEFICIAL USE OF
IT, since the transfer of the Airport Lands to MIAA is merely to reorganize
MIAA into a division in the Bureau of Air Transportation into a separate and
autonomous body. BUT, even if the Airport lands are transferred to MIAA for
the beneficial use of it, the Airport lands are still not taxable because it is not
transferred to a taxable person.

 The ONLY WAY for those Airport Lands to be taxable is when it is leased to
private companies/persons or TAXABLE persons for COMMERCIAL use as
stated in Lung Center of the Philippines v. Quezon City.

Refutations of Arguments of Minority (City of Paranaque)

MINORITY: Sec. 193 withdrew ALL tax exemptions from ALL natural or
juridical PERSONS.
SC: This is WRONG.
As per Section 193 of the Local Government Code of 1991:
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in
this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
The Minority focused on the phrases enjoyed by all persons, whether natural
or juridical and hereby withdrawn upon the effectivity of this Code and
concluded that EVERYONE (juridical or natural) is subject to the taxing powers
of the local government.
Which means only local water districts, cooperatives duly registered under
RA 6938, and non-stock and non-profit hospitals and educational institutions
are the ONLY ONES EXEMPTED from tax.
BUT, section 193 has a clause which says UNLESS OTHERWISE PROVIDED IN
THIS CODE and Section 133 (o) PROVIDES OTHERWISE to the withdrawal of
tax exemptions when it stated that instrumentalities are outside the taxing
powers of the local government units. Section 234 ALSO PROVIDES
OTHERWISE when it stated that real property owned by the RP is exempt from
tax, although an exception to it is when the real property is given to a taxable
entity for the beneficial use of the latter, which in this case IS NOT.
If we were to follow the logic of the minority, then the NATIONAL
GOVERNMENT (since it is a juridical person) will be subjected to LOCAL
GOVERMENT tax which is WRONG and ABSURD.
MINORITY: The definition of the Administrative Code of GOCC (saying a
GOCC is a non-stock, stock corporation) is WRONG.
SC: NO, YOURE WRONG! Administrative Code definition is CORRECT!
The definition of GOCCs by the Administrative Code states that a GOCC is a
non-stock or stock corporation. The definition of the Admin Code will not be
used if it is specifically pointed out that the definition used in a specific
statute should be different, and since the LGC is silent on the definition of
GOCC, then the Admin Code will suffice.

Guide on How to read Section 133, 193, 234 of the Local Government Code
Section 133:
Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.
Local Government cant tax the National Government, its agencies and
instrumentalities, and other LGUs
Section 193:
Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code,
tax exemptions or incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
Tax Exemptions previously granted have all been withdrawn which makes all natural
and juridical persons taxable unless otherwise provided by the Code.
Section 234:
Exemptions from Real Property Tax. - The following are exempted from payment of
the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
Real property owned by the RP is NOT subject to tax unless it is granted to a taxable
person for his or her beneficial use.
TAKING THIS ALL TOGETHER:
All tax exemptions granted to all natural and juridical persons were withdrawn. But,
the local government still cant tax instrumentalities and real property of the
government. The only way for real property to be taxed is when is if the real
property is for the beneficial use of such property.
In this case, MIAA and Airport lands were exempt from tax because MIAA is an
instrumentality and properties are real property owned by the government.
In MCIAA vs. Marcos, Mactan Airport Authority was not exempt from tax because it
was found to be a GOCC, because it was not an instrumentality of the national
government and the national government in this case was defined as the three
branches of government. There is a conflict between this case and MCIAA vs.
Paranaque. If we follow the Marcos case, the Manila airport authority is ALSO a

GOCC since it is not an instrumentality of the national government or the three

branches of government.