Manila International Airport Authority vs CA

Facts:
 Manila International Airport Authority (MIAA) is the operator of the Ninoy International Airport
located at Paranaque City. The Officers of Paranaque City sent notices to MIAA due to real
estate tax delinquency. MIAA then settled some of the amount. When MIAA failed to settle the
entire amount, the officers of Paranaque city threatened to levy and subject to auction the land
and buildings of MIAA, which they did. MIAA sought for a TRO from the CA but failed to do so
within the 60 days reglementary period, so the petition was dismissed.
 MIAA then sought for the TRO with the Supreme Court a day before the public auction. MIAA
was granted with the TRO but unfortunately the TRO was received by the Paranaque City
officers 3 hours after the public auction.
 MIAA claims that although the charter provides that the title of the land and building are with
MIAA, still the ownership is with the Republic of the Philippines. MIAA also contends that it is
an instrumentality of the government and as such exempted from real estate tax. It also
contends that the land and buildings of MIAA are of public dominion therefore cannot be
subjected to levy and auction sale.
 On the other hand, the officers of Paranaque City claim that MIAA is a government owned and
controlled corporation therefore not exempted to real estate tax.

Issue & Ruling

WON the Airport Lands and Buildings of MIAA are exempt from real estate tax. YES.

First, MIAA is not a GOCC.

 There is no dispute that a government-owned or controlled corporation is not exempt from real
estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13)
of the Introductory Provisions of the Administrative Code of 1987 defines a government-
owned or controlled corporation as follows:
o 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 51% of its capital
stock
 Hence, it 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, and has no stockholders or voting shares.
o 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.”
o 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.
  What is it then? MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other government
instrumentality, the only difference is that MIAA is vested with corporate powers. 1
 When the law vests in a government instrumentality corporate powers, the instrumentality does
not become a corporation. Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain, police authority and the levying of fees and charges.
 At the same time, it exercises “all the powers of a corporation under the Corp. Law insofar as
these powers are not inconsistent with the provisions of this Executive Order.”
 Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated
with the department framework.
 Section 133(o) of the LGC recognizes the basic principle that local governments cannot tax the
national government, which historically merely delegated to local governments the power to
tax. While the 1987 Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power “subject to such guidelines
and limitations as the Congress may provide.”
o There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of local
governments. The only exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential public services for sound and
compelling policy considerations.

Second, Airport Lands and Buildings of MIAA are owned by the Republic.
 The Airport Lands and Buildings are devoted to public use because they are used by the public
for international and domestic travel and transportation. The fact that the MIAA collects
terminal fees and other charges from the public does not remove the character of the Airport
Lands and Buildings as properties for public use.
 The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of
public dominion. As properties of public dominion, the Airport Lands and Buildings are outside
the commerce of man.
 Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale
of any property of public dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to encumbrances, foreclosures
and auction sale. This will happen if the City of Parañaque can foreclose and compel the
auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.
 Unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from
public use, they are properties of public dominion
 Section 234(a) of the Local Government Code also exempts from real estate tax any „[r]eal
property owned by the Republic of the Philippines.”

Third, the minority’s contentions are erroneous.

 The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of
the Local Government Code of 1991 withdrew the tax exemption of “all persons, whether

1
SEC. 2. General Terms Defined.––x x x x
(10) Instrumentality refers to any agency of the National
Government, not integrated within the department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. x x x (Emphasis supplied)
 natural or juridical” upon the effectivity of the Code. The minority states that MIAA is
indisputably a juridical person.
o The argument of the minority is fatally flawed. Section 193 of the Local Government
Code expressly withdrew the tax exemption of all juridical persons “[u]nless otherwise
provided in this Code.” Now, Section 133(o) of the Local Government Code
expressly provides otherwise, specifically prohibiting local governments from
imposing any kind of tax on national government instrumentalities
 The minority also contends that the phrase “government-owned or controlled corporation”
should apply only to corporations organized under the Corporation Code, the general
incorporation law, and not to corporations created by special charters. The minority sees no
reason why government corporations with special charters should have a capital stock.
 This argument is also flawed.
o First, the Administrative Code definition of the phrase “government-owned or controlled
corporation” does not distinguish between one incorporated under the Corporation Code or
under a special charter. Where the law does not distinguish, courts should not distinguish.
o Second, Congress has created through special charters several government-owned
corporations organized as stock corporations. Prime examples are the Land Bank of the
Philippines and the Development Bank of the Philippines.
o Third, the government-owned or controlled corporations created through special charters
are those that meet the two conditions prescribed in Section 16, Article XII of the
Constitution.
 The 1st condition: the government- owned or controlled corporation must meet the test
of economic viability.
 The Constitution expressly authorizes the legislature to create GOCCs through
special charters only if these entities are required to meet the twin conditions of
common good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters unless
they are made to comply with the two conditions of common good and economic
viability. The test of economic viability applies only to government-owned or
controlled corporations that perform economic or commercial activities and need to
compete in the market place. Being essentially economic vehicles of the State for
the common good - meaning for economic development purposes - these GOCCs
with special charters are usually organized as stock corporations.
 In contrast, government instrumentalities vested with corporate powers and
performing governmental or public functions need not meet the test of economic
viability
 Thus, the Constitution imposes no limitation when the legislature creates
government instrumentalities vested with corporate powers but performing
essential governmental or public functions. Congress has plenary authority to
create government instrumentalities vested with corporate powers provided these
instrumentalities perform essential government functions or public services.
 The MIAA need not meet the test of economic viability because the legislature did
not create MIAA to compete in the market place. MIAA does not compete in the
market place because there is no competing international airport operated by the
private sector. MIAA performs an essential public service as the primary domestic
and international airport of the Philippines