Case No.

SECOND DIVISION

G.R. No. 214044, June 19, 2019

UNIVERSITY OF THE PHILIPPINES, PETITIONER, v. CITY TREASURER OF

QUEZON CITY, RESPONDENT.

DECISION

CARPIO, J.:

The Case

G.R. No. 214044 is a petition for certiorari and prohibition 1 filed by the University of the
Philippines (UP) against the City Treasurer of Quezon City (City Treasurer) seeking to
annul the Statement of Delinquency dated 27 May 2014 addressed to UP as well as the
Final Notice of Delinquency dated 11 July 2014 which required UP to pay real property
tax on a parcel of land covered by TCT No. RT-107350 (192689), which is currently
leased to Ayala Land, Inc. (ALI). The petition also seeks to enjoin the City Treasurer, or
any of his agents or representatives, from proceeding with the sale of the subject land
at a public auction pursuant to the 11 July 2014 Final Notice of Delinquency.

The Facts

In their submitted pleadings before this Court, both UP and the City Treasurer admitted
that UP is the registered owner of a parcel of land covered by TCT No. RT-107350
(192689). UP entered into a contract of lease with ALI over the subject land on 27
October 2006.2

UP further narrated in its petition:

x x x x

5. UP is the registered owner of a parcel of land covered by and more particularly

described in TCT No. RT-107530 (192689) of the Registry of Deeds of Quezon City, with
an area of 985,597 square meters and located along Commonwealth Avenue, Diliman,
Quezon City.

6. On 27 October 2006, UP entered into a Contract of Lease with Development

Obligations with [ALI] over a portion of the aforementioned parcel of land containing an
area of 380,630 square meters. The leased property is now known as the UP-Ayala
Technohub.

7. In a Notice of Assessment addressed to ALI dated 23 August 2012, ALI was informed

that the subject property has been "reclassified and assessed for taxation purposes with
an assessed value of P499,500,000.00 effective 2009."

8. In a letter to UP President Pascual dated 22 August 2012, the City Assessor of

Quezon City informed UP that the aforementioned Notice of Assessment was served
upon ALI as the entity liable for the real property tax on the subject property pursuant
to Section 205(d) and Section 234(a) of the Local Government Code.

9. In a Statement of Delinquency dated 05 December 2012, addressed to the UP North

Property Holdings, Inc., the [City Treasurer] demanded the payment of real property
tax on the subject property amounting to P78,970,950.00 for the years 2009-2011 and
the first three quarters of 2012.

10. In another letter to UP President Pascual dated 09 September 2013, the City
Assessor of Quezon City furnished UP a copy of the letter of the Bureau of Local
Government Finance (BLGF) of the Department of Finance [(DOF)] dated 01 August
2013, which opined that ALI is the party legally accountable for the real property taxes
on the subject property. It was further stated that the City Assessor's Office "will be
sending the official Notice of Assessment and the corresponding Tax Declaration for the
subject property under the name of [ALI]. . ."

11. In another Statement of Delinquency dated 24 September 2013, addressed to the

UP North Property Holdings, Inc., the [City Treasurer] again demanded the payment of
real property tax on the subject property in the updated amount of P102,747,150.00
for the years 2009-2012 and the first three quarters of 2013.

12. For the first time and without a prior Notice of Assessment, a Statement of
Delinquency dated 27 May 2014 addressed to UP was issued by the [City Treasurer]
demanding the payment of real property tax on the subject property amounting to
P106,992,990.00 for the years 2009 to 2013 and the first quarter of 2014.

13. In his letter to the City Treasurer of Quezon City dated 13 June 2014, UP President
Pascual requested the postponement of any proceeding related to the
aforementioned Statement of Delinquency. He explained -
We respectfully take exception to the Statement of Delinquency dated 27 May 2014 and
the alleged delinquency of the University with respect to the payment of the real estate
taxes. The University of the Philippines, as the National University, has been granted
tax exemptions under Republic Act No. 9500, otherwise known as the University of the
Philippines Charter of 2008, that are express, patent and unambiguous. The grant is
exceedingly extensive that it provided the University the exemption from all taxes and
duties vis-a-vis all revenues and assets used for educational purposes or in support
thereof.

Moreover, in the letter of the Bureau of Local Government Finance ("BLGF") dated 01
August 2013, addressed to the Hon. City Mayor, Herbert M. Bautista, the BLGF opined
on the issue as to which party shall be accountable for the unpaid real estate taxes due
on the thirty-seven (37) hectares of land owned by the University and being leased out
to [ALI], the same property which is the subject of the Statement of Delinquency dated
27 May 2014. The BLGF concluded that "[ALI], being the lessee, is the legally
accountable party to the unpaid real property taxes on the government-owned UP
Property." The foregoing opinion of the BLGF confirms that the University is exempt
from real estate taxes, an absolute right that the University enjoys under R.A. No.
9500.
14. On 22 July 2014, UP received the Final Notice of Delinquency dated 11 July 2014
from the Office of the City Treasurer demanding the payment of real property tax on
the subject property in the updated amount of P117,182,700.00 for the years 2009-
2013 and the first three quarters of 2014.3
UP filed the present case before this Court within 60 days from receipt of the 11 July
2014 Final Notice of Delinquency.4

On 29 September 2014, we issued a Resolution 5 which required the City Treasurer to

file a Comment. We also issued a Temporary Restraining Order to enjoin the City
Treasurer, his agents or representatives, from enforcing the Final Notice of Delinquency
dated 11 July 2014 and proceeding with the sale of subject land at a public auction
scheduled on 20 November 2014.

On 20 July 2015, we issued a Resolution6 requiring the City Treasurer to show cause

why he/she should not be disciplinarily dealt with or held in contempt for failure to file
comment before the period expired on 12 October 2014.

On 7 March 2016, we issued a Resolution7 imposing upon the City Treasurer a fine of

P1,000.00 for failure to file comment, and required compliance within ten days from
notice. On 20 July 2016, we issued a Resolution 8 imposing upon the City Treasurer an
increased fine of P2,000.00 for failure to file comment, and required compliance within
ten days from notice.

On 18 August 2016, we received an Urgent Motion for Extension of Time with

Manifestation9 from Ms. Ruby Rosa G. Guevarra (Ms. Guevarra), Acting Assistant City
Treasurer of Quezon City. She alleged and manifested:
x x x x

2. That as early on [sic] April 15, 2016, herein respondent through its City Treasurer,
Ms. Basilia S. Pacis and to date, through its Acting Assistant City Treasurer, sought for
the legal assistance of Atty. Christian B. Valencia, City Legal Officer of the Local
Government Unit, Quezon City, to prepare and file Comment to the instant Petition for
Certiorari and Prohibition, as may be evidenced by the Indorsement dated August 11,
2016 and Indorsement dated August 15, 2016 true copies of them are hereto attached
as Annexes "1" and "2" and made parts hereof[;]

To date, August 18, 2016, there was no prepared Comment by the City Legal Officer to
be filed in the Honorable Court;

3. That to date, the undersigned, Ms. Ruby Rosa G. Guevarra is in [sic] the Acting
Assistant City Treasurer of the Local Government Unit, Quezon City, as the City
Treasurer, Ms. Basilia S. Pacis retired [from] said position as Treasurer;

4. That to date, the undersigned, Ms. Ruby Rosa G. Guevarra is looking for a counsel to
help her in the preparation and filing of a Comment to the Petition for Certiorari and
Prohibition;

5. That the amount of Two Thousand (P2,000) Pesos, as fine for the non-filing of the
Comment was paid, but the said payment shall be considered payment under protest,
as the undersigned is unjustifiably failed [sic], refused and ignored to be legally
assisted by the City Legal Officer of the Local Government Unit, Quezon City, for [sic]
the preparation and filing the said required Comment[.] 10
On 29 September 2016, Ms. Guevarra, as Officer in Charge of the City Treasurer's
Office, filed her Comment11 which reads:
1. That the relief prayed for in the instant Petition for Certiorari and Prohibition is the
same allegation specifically stated in its body, that:
to annul the Statement of Delinquency dated 27 May 2014 and the Final Notice of
Delinquency dated 11 July 2014.
WITH ALL DUE RESPECT, not within the province of the Honorable Court to adjudicate.
Truth to tell, there must be [a] full-blown trial to be conducted by a trial court for the
determination of the true facts whether to annul the said Statement of Delinquency
dated 27 May 2014 and the Final Notice of Delinquency dated 11 July 2014. But, time
and again, it is ruled that the Honorable Court is not a trier of facts.

In APQ Shipmanagement [sic] Co., LTD, versus Casenas, 725 SCRA 108, the Honorable
Court reminded us:
The Supreme Court is not a trier of facts and, thus, its jurisdiction is limited only to
reviewing errors of law.
2. That the respondent is not the real party-in-interest in the instant Petition for
Certiorari and Prohibition[.]

3. That the petitioner failed to file the Motion for Reconsideration, when it admitted the
receipt of· the assailed Notice of Statement of Delinquency dated May 27,2014 and the
Final Notice of Delinquency dated July 11, 2014.

Thus, petitioner filed the Instant Petition without filing the appropriate motion to give
the respondent the opportunity to correct its alleged error.
In Lanier versus People. 719 SCRA 477, the Honorable Court held: Well-established is
the rule that a motion for reconsideration is a condition sine qua non for the filing of a
petition for certiorari.

xxxx
[7.] Most importantly, petitioner is not exempted from paying real property tax for its
real property leased to [ALI] pursuant to the mandate of Section 205(d) and Section
234(a) of Republic Act No. 7160, otherwise known as "The Local Government Code of
1991[.]"

Admittedly, on October 27, 2006, petitioner entered into the Contract of Lease with
[ALI], subject matter of which is petitioner's parcel of land covered by Transfer
Certificate of Title No. RT-107350 (192689), now allegedly owned by UP North Property
Holdings, Inc. Said leased [sic] of the real property belonging to the petitioner failed to
pay the real property tax from 2009-2013 and the first three quarters of 2014.

In City of Pasig versus Republic, 656 SCRA 271, the Honorable Court unswervingly
ruled:
Where the parcels of land owned by the Republic are not properties of public dominion,
portions of the properties leased to taxable entities are not only subject to real estate
tax, they can also be sold at public auction to satisfy the tax delinquency.
Moreover, respondent merely followed the legal basis of the Department of Finance,
that:
ALI (Ayala Land Inc.) is the party legally accountable for the real property taxes on the
subject property.
[ALI] was duly notified of the subject Statement of Delinquency and other similar
notices.12
On 28 November 2016, we issued a Resolution13 that, among others, noted Ms.
Guevarra's Comment, and required UP to file a reply. UP, through the OSG, filed its
Reply14 on 20 February 2017, where it addressed Ms. Guevarra's questions regarding
the propriety of the remedy and the taxability of UP based on Republic Act No.
950015 and on Section 133(o)16 of the Local Government Code.

The Issue

Petitioner UP raised only one issue before this Court:

WHETHER PETITIONER UNIVERSITY OF THE PHILIPPINES IS LIABLE FOR REAL
PROPERTY TAX IMPOSED ON THE SUBJECT PROPERTY LEASED TO AYALA LAND, INC. 17
The Court's Ruling

We grant the petition.

This Court has the power to decide the present case. Findings of fact are not necessary
as the present petition asks to determine whether UP, as a chartered academic
institution with specific legislated tax exemptions, is legally liable for the real property
tax on the land leased to ALI. This issue is a pure question of law, not of fact.

The property subject of this case refers only to the parcel of land covered by TCT No.
RT-107350 (192689). The improvements on this parcel of land that were introduced by
ALI are not covered by the present case.

Timeline of Events and Applicable Laws

The Contract of Lease (with Development Obligations) between UP and ALI was
executed on 27 October 2006. The 4 th Whereas Clause of the Contract described the
project proposal, thus:
WHEREAS, in response to the LESSOR's aforementioned invitation, Ayala Land, Inc., in
September 2005, submitted to the LESSOR a Development Proposal entitled
"DEVELOPMENT PROPOSAL FOR UP NORTH SCIENCE & TECHNOLOGY PARK," dated
August 1, 2005, and subsequently, presented to the then UP Board of Regents such
proposal which is embodied in a presentation manual, entitled "DEVELOPMENT
PROPOSAL FOR UP NORTH SCIENCE & TECHNOLOGY PARK," dated September 2005,
both attached hereto and marked as Annexes "E" and "E-1," respectively (the
"Development Proposals"), signifying therein its interest in leasing and developing the
UP North S&T Park and proposing to lease and develop the UP North S&T Park Phase I
according to its proposals, into a prestigious and dynamic science and technology park,
where research and technology-based collaborative projects between technology and
the academe thrive, thereby becoming a catalyst for the development of the
information technology and information technology enabled services;18
The Contract provided that ALI owns the improvements on the leased land:
3.2 PERMANENT IMPROVEMENTS; LESSOR TO BECOME OWNER OF PERMANENT
IMPROVEMENTS AT END OF LEASE
x x x x

(c) Before the termination, expiration, or cancellation of this Contract prior to the lapse
of the original Lease Term, all renovations, alterations, and improvements and the
Permanent Improvements constructed during the original Lease Term shall be owned
by, and shall be for the account of the LESSEE; x x x. 19
As to real property taxes, the contract between UP and ALI stated:
12.2 REAL ESTATE TAXES ON LAND

Should real estate taxes be levied on the LEASED PREMISES, the LESSOR shall assume
the payment of the real estate taxes on the land, while the LESSEE shall assume the
payment of real property taxes on the improvements introduced on the LEASED
PREMISES.20
On 29 April 2008, Republic Act No. 9500, or the UP Charter of 2008, was signed into
law. Republic Act No. 9500 addressed UP's real property and income derived therefrom
in Sections 22 and 25(a). These sections read:
SEC. 22. Land Grants and Other Real Properties of the University. -

(a) The State shall support the University of the Philippines System as the national
university in the form of lump sum amount, through general appropriations and other
financial benefits, and in kind, through land grants and donations and use of other real
properties. To carry out the intent of these grants, income derived from the
development of all land grants and real properties shall be used to further the end of
the national university, as may be decided by the board;

x x x x

(c) The Board may plan, design, approve and/or cause the implementation of land
leases: Provided, That such mechanisms and arrangements shall sustain and protect
the environment in accordance with law, and be exclusive of the academic core zone of
the campuses of the University of the Philippines: Provided, further, That such
mechanisms and arrangements shall not conflict with the academic mission of the
national university;

(d) The Board may allow the use of the income coming from real properties of the
national university as security for transactions to generate additional revenues when
needed for educational purposes;

x x x x

SEC. 25. Tax Exemptions. - The provisions of any general or special law to the contrary
notwithstanding:

(a) All revenues and assets of the University of the Philippines used for educational
purposes or in support thereof shall be exempt from all taxes and duties;

x x x x (Emphasis supplied)
A letter,21 dated 22 August 2012 and addressed to the UP President from Mr. Rodolfo M.
Ordanes, Officer In Charge, City Assessor (City Assessor), informed UP of the City
Assessor's service of a Notice of Assessment to ALI This Notice of Assessment had
Sections 205 and 234 of the Local Government Code as its bases. On 23 August 2012,
the City Assessor issued a Notice of Assessment 22 to ALI. The notice stated that the
land subject of the lease agreement with UP was reclassified and assessed for taxation
purposes with an assessed value of P499,500,000.00 effective 2009. The pertinent
provisions of Sections 205 and 234 read:
Section 205. Listing of Real Property in the Assessment Rolls. -
x x x x

(d) Real property owned by the Republic of the Philippines, its instrumentalities and
political subdivisions, the beneficial use of which has been granted, for consideration or
otherwise, to a taxable person, shall be listed, valued and assessed in the name of the
possessor, grantee or of the public entity if such property has been acquired or held for
resale or lease.
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;

xxxx
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.
The Local Government Code took effect on 1 January 1992.

On 5 December 2012, the City Treasurer issued a Statement of Delinquency 23 to UP

North Property Holdings, Inc. for the period 2009 to 2011 and the first three quarters of
2012 in the total amount of P78,970,950.00. The total amount included the tax due and
penalty.

Mr. Salvador M. Castillo, Officer-In-Charge, Executive Director of Bureau of Local

Government Finance, Department of Finance (BLGF-DOF), sent a letter 24 dated 1
August 2013 to Quezon City Mayor Herbert M. Bautista (Mayor Bautista). This letter
also referred to Sections 205 and 234 of the Local Government Code as bases to
conclude that ALI, as the lessee, is the legally accountable party for the unpaid real
property taxes due covering the "government-owned UP property." 25 The 1 August 2013
letter from BLGF DOF to Mayor Bautista also stated:
Evidently, real property owned by the Republic of the Philippines are exempt from
payment of the real property tax. However, if the beneficial use thereof has been
granted for consideration or otherwise to a taxable person, the subject real property
shall: (1) be listed, valued and assessed in the name of the beneficial user; and (2)
becomes taxable.

It is also worthy to note that as soon as the notice of assessment is served and
received by the taxpayer, an obligation to pay the amount assessed and demanded
arises (BLGF Memorandum Circular No. 04-2008, January 7, 2008)[.]

As to the argument that as stipulated in the Lease Contract entered into by and
between UP and Ayala Land Inc. that UP shall shoulder the real property taxes due on
the subject property, please be informed of the Supreme Court Decision under G.R. No.
171586, dated July 15, 2009 (National Power Corporation vs. Province of Quezon and
Municipality of Pagbilao), which is quoted in part, below:
x x x

Lastly, from the points of view of essential fairness and the integrity of our tax system,
we find it essentially wrong to allow the NPC to assume in its BOT contracts the liability
of the other contracting party for taxes that the government can impose on that other
party, and at the same time allow NPC to turn around and say that no taxes should be
collected because the NPC is tax-exempt as a government-owned and controlled
corporation. We cannot be a party to this kind of arrangement; for us to allow it without
congressional authority is to intrude into the realm of policy and to debase the tax
system that the Legislature established. We will then also be grossly unfair to the
people of the Province of Quezon and the Municipality of Pagbilao who, by law, stand to
benefit from the tax provisions of the LGC.

xxx
Further, attention is likewise invited to the pertinent portion of another SC Decision
(G.R. No. L-29772), in the case of the City of Baguio vs. Fernando S. Busuego, viz:
. . . when the GSIS sold the property and imposed said condition, the agency although
exempt from the payment of taxes clearly indicated that the property became taxable
upon its delivery to the purchaser and that the sole determinative factor for
exemption from realty taxes is the 'use' to which the property is devoted. And
where the 'use' is the test, the ownership is immaterial. (Martin on the Rev.
Adm. Code, 1961, Vol. II, p. 487, citing Apostolic Prefect of Mt. Province vs. Treasurer
of Baguio City, 71 Phil. 547). In the instant case, although the property was still in the
name of the GSIS pending the payment of the full price, its use and possession was
already transferred to the defendant.' Such contractual stipulation that the purchaser
on installment pay the real estate taxes pending completion of payments, although the
seller who retained title is exempt from such taxes, is valid and binding, absent any law
to the contrary and none has been cited by appellant. x x x.
Similarly, therefore, we also deemed it essentially wrong being without congressional
authority for UP to assume the real property tax liability of the Ayala Land, Inc. over
the subject property. Hence, we opine that the Ayala Land, Inc., being the
lessee, is the legally accountable party to the unpaid real property taxes due
on the government-owned UP property. 26 (Underscoring, boldfacing and
italicization in the original)
On 24 September 2013, the City Treasurer issued a Statement of Delinquency 27 to UP
North Property Holdings, Inc. The City Treasurer demanded payment of real property
tax on the subject land in the amount of P102,747,150.00 for the years 2009 to 2012
and the first three quarters of 2013.

On 27 May 2014, the City Treasurer issued a Notice of Delinquency 28 to UP for the years
2009 to 2013 and the first quarter of 2014 in the total amount of P106,992,900.00. The
total amount included the tax due and penalty. This was the first time that the City
Treasurer demanded payment from UP of real property tax on the subject land. The
City Treasurer sent the Notice of Delinquency to UP without any prior issuance of a
Notice of Assessment.

On 13 June 2014, then UP President Alfredo E. Pascual (UP President Pascual) wrote
then City Treasurer Edgar T. Villanueva (City Treasurer Villanueva) to address the
Statement of Delinquency dated 27 May 2014. The pertinent portions of the letter read:
We write in connection with the Statement of Delinquency dated 27 May 2014 issued by
your office, which the University received on 3 June 2014. In the Statement of
Delinquency, the University was required to pay the real estate taxes on its
property/ies, specifically on Tax Declaration E-128-00051, for the period from 2009 to
the 1st quarter of 2014, which was noted to be in the total amount of
Php106,992,900.00, including penalties. The University was given a period often (10)
days from receipt of the Statement of Delinquency, or until 13 June 2014, to pay the
said real estate taxes.

We respectfully take exception to the Statement of Delinquency dated 27 May 2014 and
the alleged delinquency of the University with respect to the payment of real estate
taxes. The University of the Philippines, as the National University, has been granted
tax exemptions under Republic Act No. 9500, otherwise known as the University of the
Philippines Charter of 2008, that are express, patent, and unambiguous. The grant is
exceedingly extensive that it provided the University exemption from all taxes and
duties vis-a-vis all its revenues and assets used for educational purposes or in support
thereof.

Moreover, in the letter of the Bureau of Local Government Finance ("BLGF") dated 1
August 2013, addressed to the Hon. City Mayor, Herbert M. Bautista, the BLGF opined
on the issue as to which party shall be held accountable for the unpaid real estate taxes
due on the thirty-seven (37) hectares of land owned by the University and being leased
out to Ayala Land, Inc., the same property which is [the] subject of the Statement of
Delinquency dated 27 May 2014. The BLGF concluded that "Ayala Land, Inc., being the
lessee, is the legally accountable party to the unpaid real property taxes due on the
government-owned UP property." The foregoing opinion of the BLGF confirms that the
University is exempt from real estate taxes, an absolute right that the University enjoys
under [Republic Act] No. 9500.

Finally, while maintaining the position that the University is exempt from real estate
taxes, we wish to point out that the University was not furnished any Notice of
Assessment prior to the issuance of the Statement of Delinquency dated 27 May 2014. 29
On 11 July 2014, the City Treasurer issued a Final Notice of Delinquency 30 to UP for the
years 2009 to 2013 and the first three quarters of 2014 in the total amount of
P117,182,700.00. The total amount also included the tax due and penalty.

We reiterate that UP is a chartered academic institution with specific legislated tax

exemptions. These tax exemptions come from the Local Government Code, as well as
from its legislative charter, Republic Act No. 9500.

Tax Exemption from the Local Government Code

One source of UP's exemption from tax comes from its character as a government
instrumentality. Section 133(o) of the Local Government Code states that, unless
otherwise provided by the Code, the exercise of taxing powers of the local government
units shall not extend to levy of taxes, fees or charges of any kind on government
instrumentalities.31

However, a combined reading of Sections 205 and 234 of the Local Government Code,
previously quoted above, also provides for removal of the exemption to government
instrumentalities when beneficial use of a real property owned by a government
instrumentality is granted to a taxable person. Stated differently, when beneficial use of
a real property owned by a government instrumentality is granted to a taxable person,
then the taxable person is not exempted from paying real property tax on such
property. This is the doctrine used by the City Assessor and the City Treasurer in the
present set of facts. The City Assessor and the City Treasurer concluded that ALI is
liable for the real property tax on the land that it leased from UP.

Republic Act No. 9500, however, gave a specific tax exemption to UP which covers the
land subject of the present case. The City Assessor and the City Treasurer overlooked
this specific exemption awarded to UP by Republic Act No. 9500. The legislative
authority given to UP by Republic Act No. 9500 is the point where the present case
differs from our ruling in National Power Corporation v. Province of Quezon (NPC
case)32 which the BLGF-DOF cited in its letter addressed to Mayor Bautista.

Tax Exemption from Republic Act No. 9500

It is clear from the timeline above that the date of effectivity of UP's legislative charter
lies between the date of effectivity of the lease contract between UP and ALI and the
dates of issuance of the Statement of Delinquency and Final Notice of Delinquency from
the City Treasurer. Republic Act No. 9500, which took effect in 2008, was not yet
enacted when UP and ALI entered into their lease contract in 2006. However, Republic
Act No. 9500 was already operative when the City Treasurer issued the Statement of
Delinquency and Final Notice of Delinquency to UP in 2014. Republic Act No. 9500 was
also operative when the City Assessor issued a Notice of Assessment to ALI in 2012, a
Statement of Delinquency to UP North Property Holdings, Inc. in 2012, and a Statement
of Delinquency to UP North Property Holdings, Inc. in 2013.

The enactment and passage of Republic Act No. 9500 in 2008 superseded Sections
205(d) and 234(a) of the Local Government Code. Before the passage of Republic Act
No. 9500, there was a need to determine who had beneficial use of UP's property
before the property may be subjected to real property tax. After the passage of
Republic Act No. 9500, there is a need to determine whether UP's property is used for
educational purposes or m support thereof before the property may be subjected to real
property tax.

In University of the Phils. v. Judge Dizon,33 we stated:

The UP was founded on June 18, 1908 through Act 1870 to provide advanced
instruction in literature, philosophy, the sciences, and arts, and to give professional and
technical training to deserving students. Despite its establishment as a body corporate,
the UP remains to be a "chartered institution" performing a legitimate government
function. It is an institution of higher learning, not a corporation established for profit
and declaring any dividends. In enacting Republic Act No. 9500 (The University of the
Philippines Charter of 2008), Congress has declared the UP as the national university
"dedicated to the search for truth and knowledge as well as the development of future
leaders."

Irrefragably, the UP is a government instrumentality, performing the State's

constitutional mandate of promoting quality and accessible education. As a government
instrumentality, the UP administers special funds sourced from the fees and income
enumerated under Act No. 1870 and Section 1 of Executive Order No. 714, and from
the yearly appropriations, to achieve the purposes laid down by Section 2 of Act 1870,
as expanded in Republic Act No. 9500. All the funds going into the possession of the
UP, including any interest accruing from the deposit of such funds in any banking
institution, constitute a "special trust fund," the disbursement of which should always
be aligned with the UP's mission and purpose, and should always be subject to auditing
by the COA.34 (Citations omitted)
In the present set of facts, both parties agree that UP owns the land subject of this
case.

Section 22 of Republic Act No. 9500, previously quoted above, allows UP to lease and
develop its land subject to certain conditions. The Contract of Lease between UP and
ALI shows that there is an intent to develop "a prestigious and dynamic science and
technology park, where research and technology-based collaborative projects between
technology and the academe thrive, thereby becoming a catalyst for the development
of the information technology and information technology-enabled service." 35 The
development of the subject land is clearly for an educational purpose, or at the very
least, in support of an educational purpose.

UP President Pascual pointed out to City Treasurer Villanueva that Republic Act No.
9500 granted extensive tax exemptions to UP. More specifically, Section 25(a) of
Republic Act No. 9500, previously quoted above, provided that all of UP's "revenues
and assets used for educational purposes or in support thereof shall be
exempt from all taxes and duties." Republic Act No. 9500 bases UP's tax exemption
upon compliance with the condition that UP's revenues and assets must be used for
educational purposes or in support thereof. There is no longer any need to determine
the tax status of the possessor or of the beneficial user to further ascertain whether
UP's revenue or asset is exempt from tax.

Apart from the rule in statutory construction that a law that is enacted later prevails
over a law that is enacted earlier because it is the latest expression of legislative
will,36 Sections 27 and 30 of Republic Act No. 9500 provide for rules of construction in
favor of Republic Act No. 9500:
SEC. 27. Rules of Construction.- No statutory or other issuances shall diminish the
powers, rights, privileges and benefits accorded to the national university under this Act
or enjoyed at present, by it under other issuances not otherwise modified or repealed
under this Act, unless subsequent legislation expressly provides for their repeal,
amendment or modification. Any case of doubt in the interpretation of any of the
provisions of this Charter shall be resolved in favor of the academic freedom and fiscal
autonomy of the University of the Philippines.

SEC. 30. Repealing Clause. - Act No. 1870, as amended, and all laws, decrees, orders,
rules, and regulations or other issuances or parts inconsistent with the provisions of this
Act are hereby repealed or modified accordingly.
Non-Applicability of the NPC Case

The facts of the present case are not on all fours with the facts in the NPC case. In the
NPC case, the NPC assumed in its build-operate-transfer (BOT) contract with Mirant
Pagbilao Corporation (Mirant) ''all real estate taxes and assessments, rates and other
charges in respect of the site, the buildings and improvements thereon and the [power
plant]."37 The Municipality of Pagbilao, Quezon assessed Mirant's tax liabilities and
furnished the NPC with a copy of the assessment letter. The NPC filed a petition before
the Local Board of Assessment Appeals and objected to the assessment against Mirant.
The NPC claimed tax exemptions or at least a reassessment for lower tax liability due to
depreciation allowance and lower assessment level. The Local Board of Assessment
Appeals, the Central Board of Assessment Appeals, and the Court of Tax Appeals all
ruled against the NPC.

We ruled in the NPC case that the NPC has no right to protest the assessment on Mirant
because the NPC is neither the owner nor the possessor or user of the subject
machineries. Under the law, Mirant is liable for the said taxes based on its "ownership,
use, and possession of the plant and its machineries." 38 We further stated in the NPC
case that the contractual stipulation between NPC and Mirant is entirely between them,
and "does not bind third persons who are not privy to the contract x x x." 39 Only Mirant
can demand compliance from the NPC for the payment of the said taxes, and the
Municipality of Pagbilao and the Province of Quezon cannot demand payment from the
NPC. Neither can these local government units be compelled to recognize the NPC's
protest of the assessment.

We declared in the NPC case that it is "essentially wrong to allow the NPC to assume in
its BOT contracts the liability of the other contracting party for taxes that the
government can impose on that other party, and at the same time allow NPC to turn
around and say that no taxes should be collected because the NPC is tax-exempt as a
government-owned and controlled corporation." This was the situation set up by UP
with ALI in 2008, before the passage of Republic Act No. 9500. Before the passage of
Republic Act No. 9500, it was essentially wrong for UP to assume in its lease contract
with ALI the liability of ALI for real property taxes based on its beneficial use of the
land, and then turn around and tell the City Treasurer that UP is exempt from paying
taxes on the land because it is a government instrumentality.

We also declared in the NPC case that if we continue to allow what NPC did to the
Province of Quezon without congressional authority, we "intrude into the realm of policy
and to debase the tax system that the Legislature established." The passage of Republic
Act No. 9500 in 2008 obliterated what was essentially wrong in the lease contract
between UP and ALI The legislature established a tax system that allows UP to validly
claim exemption from real property taxes on the land leased to ALI. Republic Act No.
9500 is UP's congressional authority for this particular exemption from real property
tax. Thus, when the City Treasurer addressed to UP the Statement of Delinquency
dated 27 May 2014 and the Final Notice of Delinquency dated 11 July 2014 and
required UP to pay real property tax on the subject land, UP was already authorized by
the legislature to validly claim exemption from real property taxes on the land leased to
ALI.
Considering that the subject land and the revenue derived from the lease thereof are
used by UP for educational purposes and in support of its educational purposes, UP
should not be assessed, and should not be made liable for real property tax on the land
subject of this case. Under Republic Act No. 9500, this tax exemption, however, applies
only to "assets of the University of the Philippines," referring to assets owned by UP.
Under the Contract of Lease between UP and ALI, all improvement on the leased land
"shall be owned by, and shall be for the account of the LESSEE [ALI]" during the term
of the lease. The improvements are not "assets" owned by UP; and thus, UP's tax
exemption under Republic Act No. 9500 does not extend to these improvements during
the term of the lease.

WHEREFORE, the petition is GRANTED. We DECLARE the University of the

Philippines EXEMPT from real property tax imposed by the City Treasurer of Quezon
City on the parcel of land covered by TCT No. RT-107350 (192689), which is currently
leased to Ayala Land, Inc. Accordingly, we declare VOID the Statement of Delinquency
dated 27 May 2014 as well as the Final Notice of Delinquency dated 11 July 2014 issued
by the City Treasurer of Quezon City to the University of the Philippines in connection
with the parcel of land covered by TCT No. RT-107350 (192689). Furthermore, the City
Treasurer of Quezon City is permanently restrained from levying on or selling at public
auction the parcel of land covered by TCT No. RT-107350 (192689) to satisfy the
payment of the real property tax delinquency.

SO ORDERED.

Case No. 2

LEONEN, J.:
A corporation, whether with or without an original charter, is under the
audit jurisdiction of the Commission on Audit so long as the government
owns or has controlling interest in it.

This resolves the Petition[1] under Rule 64 of the Rules of Court filed by

Adelaido Oriondo, Teodoro M. Hernandez, Renato L. Basco, Carmen,
Merino, and Reynaldo Salvador, former officers of the Philippine Tourism
Authority who had received honoraria and cash gifts for concurrently
rendering services to Corregidor Foundation, Inc. They assail the
Commission on Audit's Decision[2] No. 2010-095 dated October 21, 2010
and Resolution[3] dated December 6, 2013, disallowing the payment of the
honoraria and cash gifts to them for being contrary to Department of
Budget and Management Budget Circular No. 2003-5 on the payment of
honoraria and Article IX-B, Section 8[4] of the Constitution prohibiting the
payment of additional or double compensation.

The submissions of the parties present the following facts.

Executive Order No. 58, series of 1954,[5] made certain battlefield areas in

Corregidor open to the public and accessible as tourist attractions.
Executive Order No. 123, series of 1968, further amended Executive Order
No. 58, thereby authorizing the Ministry of National Defense to enter into
contracts for the conversion of areas within the Corregidor as tourist spots.
[6]

Pursuant to Executive Order No. 123, the Ministry of National Defense and
the Philippine Tourism Authority executed a Memorandum of
Agreement[7] dated July 10, 1986 for the development of Corregidor and its
neighboring islands into major tourist attractions. Specifically, the Ministry
of National Defense, with prior approval of the President, leased the entire
island of Corregidor to the Philippine Tourism Authority for one peso
(P1.00). As for the Philippine Tourism Authority, it undertook to maintain
and preserve the war relics on the island and to fully develop Corregidor's
potential as an international and local tourist destination. The Philippine
Tourism Authority was thus authorized to "[p]ackage and source the
necessary funds to develop and restore the Corregidor Island group." [8]

On February 6, 1987, the Philippine Tourism Authority Board of Directors

adopted Resolution No. B-7-87,[9] approving the creation of a foundation
for the development of Corregidor. On October 28, 1987, the Corregidor
Foundation, Inc. was incorporated under Securities and Exchange
Commission Registration No. 145674.[10]

On August 3, 1993, the Philippine Tourism Authority executed a

Memorandum of Agreement[11] with Corregidor Foundation, Inc. to
centralize the island's planning and development. The Philippine Tourism
Authority agreed to release to the Corregidor Foundation, Inc. its operating
funds based on a budget for its approval. For its part, the Corregidor
Foundation, Inc. agreed to submit a quarterly report on the receipts and
disbursements of Philippine Tourism Authority funds. It additionally
agreed to deposit all collections of revenues in a distinct and separate
account in the name of the island of Corregidor, with the disposition of the
funds at the sole discretion of the Philippine Tourism Authority.

Another Memorandum of Agreement[12] was subsequently entered into by

the Philippine Tourism Authority and the Corregidor Foundation, Inc. on
September 3, 1996. The subsequent Agreement reiterated the provisions of
the August 3, 1993 Agreement but added some stipulations. In particular,
the second paragraph of item 4 was included, providing that the
disbursements of the Philippine Tourism Authority's funds by Corregidor
Foundation, Inc. shall be subject to the audit of the Internal Auditor of the
Philippine Tourism Authority and the Commission on Audit.

On February 14, 2005, the Commission on Audit, through Audit Team

Leader Divina M. Telan, issued Audit Observation Memorandum No. 2004-
002[13] for comments of then Corregidor Foundation, Inc. Executive
Director Artemio G. Matibag. There, the Audit Team noted that the
following personnel of the Philippine Tourism Authority who were
concurrently rendering services in Corregidor Foundation, Inc. received
honoraria and cash gifts in 2003, to wit:

Name Position Bonus Cash Gift Total

Treasurer / Deputy General
Adelaido
Manager of the Philippine 42,000 1,500 43,500
Oriondo
Tourism Authority
Teodoro
Corporate Secretary 42,000 1,500 43,500
Hernandez
Renato L.
Technical Assistant 16,000 1,500 17,500
Basco
Carmen
Executive Secretary A 9,600 1,500 11,100
Merino
Reynaldo
Utility Worker A 14,400 1,500 15,900
Salvador
Total 124,000 7,500131,500
The Audit Team was of the opinion that the grant of honoraria to Oriondo,
Hernandez, Basco, Merino, and Salvador were contrary to Department of
Budget and Management Circular No. 2003-5.[14] This budget circular,
applicable to all national government agencies, government-owned and/or
controlled corporations, and government financial institutions, enumerated
in item 4 those exclusively entitled to honoraria:
4. General Guidelines

Heads of entities are authorized to use their respective appropriation for

the payment of honoraria only to the following:

teaching personnel of the Department of Education, Commission on

Higher Education, Technical Education and Skills Development
Authority, State Universities and Colleges and other educational
4.1.
institutions engaged in actual classroom teaching whose teaching load
is outside of the regular office hours and/or in excess of the regular
load;
those who act as lecturers, resource persons, coordinators and
facilitators in seminars, training programs and other similar activities
4.2
in training institutions, including those conducted by entities for their
officials and employees; and
chairs and members of Commissions/Board Councils and other similar
entities which are hereinafter referred to as a collegial body including
4.3.the personnel thereof, who are neither paid salaries nor per diems but
compensated in the form of honoraria as provided by law, rules and
regulations.[15]
Further, according to the Audit Team, the cash gifts given to Oriondo,
Hernandez, Basco, Merino, and Salvador, as officers of the Corregidor
Foundation, Inc., constituted double compensation prohibited in Article
IX-B, Section 8[16] of the Constitution because they had already received
honoraria and cash gifts as employees of the Philippine Tourism Authority.
[17]

The Audit Team thus recommended that Corregidor Foundation, Inc.

comply with Budget Circular No. 2003-5; otherwise, it would be
constrained to recommend the disallowance of the amounts paid as
honoraria and cash gift.[18]

On June 15, 2006, the Legal and Adjudication Office-Corporate of the

Commission on Audit issued Notice of Disallowance No. CFI-2006-001,
[19]
 disallowing in audit the honoraria and cash gift paid to Oriondo,
Hernandez, Basco, Merino, and Salvador. Aside from the payees, the
persons made liable for the amount were Corregidor Foundation, Inc.'s
Chief Accountant Noria Jane Perez, Finance Office Lauro Legazpi, and
Executive Director Artemio G. Matibag.[20]
Oriondo, Hernandez, Basco, Merino, and Salvador filed a Motion for
Reconsideration of the Notice of Disallowance, arguing that Corregidor
Foundation, Inc. is a private corporation created under the Corporation
Code and, therefore, cannot be audited by the Commission on Audit. [21] This
was denied by the Legal Adjudication Office-Corporate in its Decision No.
2007-037,[22] where it held that Corregidor Foundation, Inc. is a
government-owned or controlled corporation.

The appeal filed was likewise denied by the Adjudication and Settlement
Board of the Commission on Audit in Decision No. 2009-002.[23] Citing the
definition of a government owned or controlled corporation in the
Administrative Code of 1987, the Adjudication and Settlement Board held
that Corregidor Foundation, Inc. is a government-owned or controlled
corporation under the audit powers of the Commission on Audit.
Corregidor Foundation, Inc., according to the Adjudication and Settlement
Board, is a non-stock corporation which receives funds from the
government, through the Philippine Tourism Authority. The Adjudication
and Settlement Board highlighted that Memorandum of Agreement dated
September 3, 1996 provided that the funds received and disbursed by the
Corregidor Foundation, Inc. is subject to the audit of the Internal Auditor
of the Philippine Tourism Authority and the Commission on Audit. Finally,
Corregidor Foundation, Inc. was deemed created for a public purpose,
which is the maintenance and preservation of Corregidor.

Considering that Corregidor Foundation, Inc. is a government-owned or

controlled corporation, the Adjudication and Settlement Board held the
foundation is subject to Budget Circular No. 2003-5 and 2003-02, limiting
the grant of honoraria to specific government personnel, and Article IX-B,
Section 8 of the Constitution prohibiting double compensation.[24]

The dispositive portion of the Adjudication and Settlement Board's

Decision No. 2009-002 read:

WHEREFORE, the foregoing premises considered, this Board

hereby DENIES the instant appeal for want of merit. Accordingly, LAO-
Corporate Decision No. 2007-037 dated June 07, 2007 sustaining ND No.
CFI-2006-001 dated June 15, 2006 is AFFIRMED.[25] (Emphasis in the
original)
Oriondo, Hernandez, Basco, Merino, and Salvador appealed[26] Decision
No. 2009-002, but the appeal was denied by the Commission on Audit in
its October 21, 2010 Decision No. 2010-095.[27]

The Commission on Audit Commission Proper maintained that the

Corregidor Foundation, Inc. is a government-owned or controlled
corporation given the following circumstances: (1) the incorporators of the
Corregidor Foundation, Inc. are all government officials; (2) the Corregidor
Foundation, Inc. is substantially subsidized by the government, with
99.66% of its budget coming from the Department of Tourism, Duty Free
Philippines, and the Philippine Tourism Authority; (3) the budget of
Corregidor Foundation, Inc. needs prior approval of the Philippine Tourism
Authority; (4) Corregidor Foundation, Inc. is required to submit a quarterly
report of its receipts and disbursement of Philippine Tourism Authority
funds; (5) all collections of revenues are to be deposited and taken up in the
books of Corregidor Foundation, Inc. as accountability to the Philippine
Tourism Authority, and the disposition of the funds are at the sole
discretion of the Philippine Tourism Authority; and (6) Corregidor
Foundation, Inc. has no authority to dispose of the properties subject of the
Memorandum of Agreement.[28]

While it is true that Corregidor Foundation, Inc. was organized under the
Corporation Code, the Commission Proper, citing Philippine Society for the
Prevention of Cruelty to Animals v. Commission on Audit,[29] held that it is
the "totality test"—the totality of the relation of a corporation to the State-
that determines a corporation's status as a government-owned or
controlled corporation. Given that Corregidor Foundation, Inc. was created
by the State as its own instrumentality to carry out a governmental
function, the Commission Proper concluded that Corregidor Foundation,
Inc. should be considered a public corporation.

The Commission proper added that coverage under the Social Security
System "is but a consequence of [Corregidor Foundation, Inc.'s] insistence
that it is a private corporation, not a priori reason that it is."[30]

Given the foregoing premises, the Commission Proper held that Corregidor
Foundation, Inc. is a government-owned or controlled corporation subject
to Budget Circular No. 2003-5 and Article IX-B, Section 8 of the
Constitution. Corregidor Foundation, Inc. had no authority to grant
honoraria to its personnel and give cash gifts to its employees who were
concurrently holding a position in the Philippine Tourism Authority.
The dispositive portion of the Commission on Audit's Decision No. 2010-
095 read:

WHEREFORE, premises considered, the instant appeal is

hereby DENIED for lack of merit. Accordingly, ASB Decision No. 2009-
002 dated January 26, 2009 is AFFIRMED.[31] (Emphasis in the original)
Oriondo, Hernandez, Basco, Merino, and Salvador filed a Motion for
Reconsideration, which the Commission on Audit En Banc denied in a its
December 5, 2013 Resolution[32] thus:

The [Commission on Audit Proper] denied the Motion for Reconsideration

for lack of merit and affirmed with finality COA Decision No. 2010-095
dated October 21, 2010 affirming the disallowance on the grant of
honoraria and cash gift to the Philippine Tourism Authority employees who
are rendering services to Corregidor Foundation[,] Inc. in the amount of
P131,500.00. The movant failed to present new and material evidence that
would warrant a reversal or modification of the assailed decision. [33]
On March 14, 2014, Oriondo, Hernandez, Basco, Merino, and Salvador filed
before this Court a Petition[34] designated as a "Petition for Review on
Certiorari"[35] under Rule 64 of the Rules of Court. The Commission on
Audit, through the Office of the Solicitor General, filed its Comment [36] on
June 25, 2014, to which Oriondo, Hernandez, Basco, Merino, and Salvador
replied[37] on October 7, 2014. Upon the directive of this Court,[38] the
parties filed their respective Memoranda.[39]

According to petitioners, a cursory reading of Article IX-D, Section 2 [40] of

the Constitution reveals that the Commission on Audit has no power to
determine whether an entity is a government-owned or controlled
corporation. Petitioners maintain that the Commission on Audit had no
jurisdiction to conduct a post-audit of Corregidor Foundation, Inc.'s
disbursements on the basis of its own determination of Corregidor
Foundation's status as a government-owned or controlled corporation.
Consequently, the Commission's rulings on the grant of honoraria and cash
gifts are allegedly null and void.[41]

On the threshold issue, petitioners insist that Corregidor Foundation, Inc.

is not a government-owned or controlled corporation due to the following
reasons: (1) Corregidor Foundation, Inc. is neither organized as a stock
corporation nor is it created by a special law or is governed by a charter
created by a special law;[42] (2) Corregidor Foundation, Inc. was organized
as a private corporation under the general corporation law, and its assets
are allegedly its exclusive property, not government-owned;[43] (3) the
personnel of Corregidor Foundation, Inc. are under the coverage of the
Social Security System, further showing that Corregidor Foundation, Inc. is
a private corporation;[44] (4) its funds come primarily from grants and
donations of international organizations and foreign entities, not from the
National Government considering that its funding was never provided in
the General Appropriations Act;[45] and (5) the quarterly reports submitted
by Corregidor Foundation, Inc. is only based on its Memorandum of
Agreement with the Philippine Tourism Authority, not because it is a
government-owned or controlled corporation.[46]

Countering petitioners, respondent Commission on Audit first highlighted

that the Petition was erroneously denominated as a "Petition for Review on
Certiorari" under Rule 64 of the Rules of Court. "[T]here is no such thing as
a Petition for Review under Rule 64,"[47] argued respondent Commission.
The error notwithstanding, respondent Commission contends that the
Petition should be treated as one for certiorari, specifically, to determine
whether or not there was grave abuse of discretion on the part of the
Commission on Audit in disallowing the grant of honoraria and cash gifts to
petitioners.[48]

On whether or not it has the jurisdiction to determine whether an entity is a

government-owned or controlled corporation, respondent Commission
argues that it has the competence to make such determination. Pursuant to
its constitutional duty to examine, audit, and settle all accounts pertaining
to the revenue and expenditures of the government, including government-
owned or controlled corporations, respondent Commission maintains that
the determination of the status of an entity as a government-owned or
controlled corporation is but a "necessary incident to [the] performance of
its duties and the discharge of its functions." [49] Respondent Commission
asserts its competency to determine the status of Corregidor Foundation,
Inc. as a government-owned or controlled corporation, arguing that it only
applied the law on the matter.[50]

On the principal issue of whether or not Corregidor Foundation, Inc. is a

government-owned or controlled corporation, respondent Commission
answers in the affirmative. It cites Philippine National Oil Company
(PNOC) - Energy Development Corporation v. National Labor Relations
Commission[51] and Philippine Society for the Prevention of Cruelty to
Animals v. Commission on Audit[52] where this Court enunciated the
criteria for determining the status of a corporation as government-owned
or controlled. Respondent Commission thereafter noted the circumstances
demonstrating that all these criteria are present in this case. First,
Corregidor Foundation, Inc. is under the Department of Tourism, created
to develop the tourism in the island of Corregidor. Second, the
incorporators of Corregidor Foundation, Inc. are all government officials
and all of its trustees are public officials sitting in an ex officio capacity.[53]

Respondent Commission maintains that Corregidor Foundation, Inc. was

created by the State to carry out a governmental function as shown by the
following: (1) Corregidor Foundation, Inc. is substantially subsidized by the
government, with 99.66% of its budget, as audited, coming from the
Department of Tourism, Duty Free Philippines, and the Philippine Tourism
Authority; (2) Corregidor Foundation, Inc.'s budget is subject to the prior
approval of the Philippine Tourism Authority; (3) Corregidor Foundation,
Inc. is required to submit a quarterly report on its receipts and
disbursement of Philippine Tourism Authority funds; (4) all collections of
revenues are deposited and taken up in the books of Corregidor
Foundation, Inc. as accountability to the Philippine Tourism Authority; and
(5) Corregidor Foundation, Inc. cannot encumber, mortgage, or alienate the
premises subject of its Memorandum of Agreement with the Philippine
Tourism Authority.[54] These allegedly show that the disallowed amounts
were public funds, which are definitely within the audit jurisdiction of
respondent Commission; thus, there was no grave abuse of discretion on
the part of the Commission on Audit in issuing the Notice of Disallowance.

The issues for this Court's resolution are:

First, whether or not the Commission on Audit has jurisdiction to

determine whether a corporation such as Corregidor Foundation, Inc. is a
government-owned or controlled corporation; and

Second, whether or not Corregidor Foundation, Inc. is a government-

owned or controlled corporation under the audit jurisdiction of the
Commission on Audit.

The Petition is dismissed.

Respondent Commission on Audit did not gravely abuse its discretion in

issuing Notice of Disallowance No. CFI-2006-001. It has the competency to
determine the status of corporations such as Corregidor Foundation, Inc. as
government-owned or controlled, and correctly found that Corregidor
Foundation, Inc. is, indeed, a government-owned or controlled corporation
under its audit jurisdiction.

We first address respondent Commission's contention that petitioners

erroneously referred to their Petition as a "Petition for Review on
Certiorari" under Rule 64 of the Rules of Court.

A petition for review on certiorari is the remedy provided in Rule 45,

Section 1 of the Rules of Court against an adverse judgment, final order, or
resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial
Court or other courts whenever authorized by law:

RULE 45
Appeal by Certiorari to the Supreme Court

SECTION 1. Filing of Petition with Supreme Court. - A party desiring to

appeal by certiorari from a judgment or final order or resolution of the
Court of Appeals, the Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari. The petition shall raise only
questions of law which must be distinctly set forth.
On the other hand, Rule 64 of the Rules of Court pertains to "Review of
Judgments and Final Orders or Resolutions of the Commission on
Elections and the Commission on Audit." Section 1 of Rule 64 defines the
scope of the Rule, while section 2 refers to "Mode of Review" and provides
that the judgments, final orders, and resolutions of the Commission on
Audit are to be brought on certiorari to this Court under Rule 65. The
pertinent provisions of Rules 64 and 65 are as follows:

RULE 64
Review of Judgments and Final Orders or Resolutions of the Commission
on Elections and the Commission on Audit

SECTION 1. Scope. — This Rule shall govern the review of judgments and
final orders or resolutions of the Commission on Elections and the
Commission on Audit.

SECTION 2. Mode of Review. — A judgment or final order or resolution of

the Commission on Elections and the Commission on Audit may be
brought by the aggrieved party to the Supreme Court on certiorari under
Rule 65, except as hereinafter provided.

SECTION 3. Time to File Petition. — The petition shall be filed within thirty
(30) days from notice of the judgment or final order or resolution sought to
be reviewed. The filing of a motion for new trial or reconsideration of said
judgment or final order or resolution, if allowed under the procedural rules
of the Commission concerned, shall interrupt the period herein fixed. If the
motion is denied, the aggrieved party may file the petition within the
remaining period, but which shall not be less than five (5) days in any
event, reckoned from notice of denial.

....

RULE 65
Certiorari, Prohibition and Mandamus

SECTION 1. Petition for Certiorari. — When any tribunal, board or officer

exercising judicial or quasi-judicial functions has acted without or in excess
of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered annulling or modifying
the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment,

order or resolution subject thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn certification of non-forum
shopping as provided in the paragraph of Section 3, Rule 46.

....
SECTION 4. Where Petition Filed. — The petition may be filed not later
than sixty (60) days from notice of the judgment, order or resolution sought
to be assailed in the Supreme Court or, if it relates to the acts or omissions
of a lower court or of a corporation, board, officer or person, in the
Regional Trial Court exercising jurisdiction over the territorial area as
defined by the Supreme Court. It may also be filed in the Court of Appeals
whether or not the same is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or
omissions of a quasi-judicial agency, and unless otherwise provided by law
or these Rules, the petition shall be filed in and cognizable only by the
Court of Appeals.

The foregoing provisions readily reveal that a Petition for Review on

Certiorari under Rule 45 is an appeal and a true review that involves
"digging into the merits and unearthing errors of judgment."[55] However,
despite the repeated use of the word "review" in Rule 64, the remedy is
principally one for certiorari that "deals exclusively with grave abuse of
discretion, which may not exist even when the decision is otherwise
erroneous."[56]
That the remedy against an adverse decision, order, or ruling of the
Commission on Audit is a petition for certiorari, not review or appeal, is
based on Article IX-A, Section 7 of the Constitution, thus:

ARTICLE IX
Constitutional Commissions

A. Common Provisions

....

SECTION 7. Each Commission shall decide by a majority vote of all its

Members any case or matter brought before it within sixty days from the
date of its submission for decision or resolution. A case or matter is deemed
submitted for decision or resolution upon the filing of the last pleading,
brief, or memorandum required by the rules of the Commission or by the
Commission itself. Unless otherwise provided by this Constitution or by
law, any decision, order, or ruling of each Commission may be brought to
the Supreme Court on certiorari by the aggrieved party within thirty days
from receipt of a copy thereof. (Emphasis Supplied)

This is affirmed in Reyna v. Commission on Audit,[57] where the Court

maintained its certiorari jurisdiction over judgments, final orders or
resolutions of the Commission on Audit:

In the absence of grave abuse of discretion, questions of fact cannot be

raised in a petition for certiorari, under Rule 64 of the Rules of Court. The
office of the petition for certiorari is not to correct simple errors of
judgment; any resort to the said petition under Rule 64, in relation to Rule
65, of the 1997 Rules of Civil Procedure is limited to the resolution of
jurisdictional issues.[58]
We agree with respondent Commission that petitioners erroneously
denominated their Petition as a "Petition for Review on Certiorari." Except
for the designation, however, we find that the Petition was filed under Rule
64 of the Rules of Court given that the Petition refers to Rule 64 and was
filed within 30 days from notice of the Resolution dated December 6, 2013
denying petitioners' Motion for Reconsideration before the Commission on
Audit. Therefore, we shall resolve the Petition in the exercise of our
certiorari jurisdiction under Article IX-A, Section 7 of the Constitution.

II

The Constitution, the Administrative Code of 1987, and the Government

Auditing Code of the Philippines define the powers of the Commission on
Audit. Article IX-D, Section 2 of the Constitution provides:

SECTION 2. (1) The Commission on Audit shall have the power, authority,
and duty to examine, audit, and settle all accounts pertaining to the
revenue and receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the Government, or any of its
subdivisions, agencies, or instrumentalities, including government-owned
or controlled corporations with original charters, and on a post-audit
basis: (a) constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous state
colleges and universities; (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such nongovernmental
entities receiving subsidy or equity, directly or indirectly, from or through
the Government, which are required by law or the granting institution to
submit to such audit as a condition of subsidy or equity. However, where
the internal control system of the audited agencies is inadequate, the
Commission may adopt such measures, including temporary or special pre-
audit, as are necessary and appropriate to correct the deficiencies. It shall
keep the general accounts of the Government and, for such period as may
be provided by law, preserve the vouchers and other supporting papers
pertaining thereto.

(2) The Commission shall have exclusive authority, subject to the

limitations in this Article, to define the scope of its audit and examination,
establish the techniques and methods required therefor, and promulgate
accounting and auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or uses of government funds
and properties. (Emphasis supplied)
A provision similar to Article IX-D, Section 2(1) is found in Book V, Title I,
Subtitle B, Chapter 4, Section 11 of the Administrative Code:

SECTION 11. General Jurisdiction. — (1) The Commission on Audit shall

have the power, authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and expenditures or
uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, or
instrumentalities, including government-owned or controlled
corporations with original charters, and on a post-audit basis: (a)
constitutional bodies, commissions and offices that have been granted fiscal
autonomy under this Constitution; (b) autonomous state colleges and
universities; (c) other government-owned or controlled corporations and
their subsidiaries; and (d) such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or through the Government,
which are required by law or the granting institution to submit to such
audit as a condition of subsidy or equity. However, where the internal
control system of the audited agencies is inadequate, the Commission may
adopt such measures, including temporary or special pre-audit, as are
necessary and appropriate to correct the deficiencies. It shall keep the
general accounts of the Government and, for such period as may be
provided by law, preserve the vouchers and other supporting papers
pertaining thereto. (Emphasis supplied)
The Government Auditing Code of the Philippines, in Section 26, likewise
provides:

SECTION 26. General Jurisdiction. — The authority and powers of the

Commission shall extend to and comprehend all matters relating to
auditing procedures, systems and controls, the keeping of the general
accounts of the Government, the preservation of vouchers pertaining
thereto for a period of ten years, the examination and inspection of the
books, records, and papers relating to those accounts; and the audit and
settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as
the examination, audit, and settlement of all debts and claims of any sort
due from or owing to the Government or any of its subdivisions, agencies
and instrumentalities. The said jurisdiction extends to all government-
owned or controlled corporations, including their subsidiaries, and other
self-governing boards, commissions, or agencies of the Government, and
as herein prescribed, including non-governmental entities subsidized by
the government, those funded by donations through the government,
those required to pay levies or government share, and those for which the
government has put up a counterpart fund or those partly funded by the
government. (Emphasis supplied)
Based on the foregoing provisions, the Commission on Audit generally has
audit jurisdiction over public entities.[59] In the Administrative Code's
Introductory Provisions, the Commission on Audit is even allowed to
categorize government-owned or controlled corporations for purposes of
the exercise and discharge of its powers, functions, and responsibilities
with respect to such corporations.[60]

The extent of the Commission on Audit's audit authority even extends to

non-governmental entities that receive subsidy or equity from or through
the government.[61]

Therefore, it is absurd for petitioners to challenge the competency of the

Commission on Audit to determine whether or not an entity is a
government-owned or controlled corporation. Jurisdiction is "the power to
hear and determine cases of the general class to which the proceedings in
question belong,"[62] and the determination of whether or not an entity is
the proper subject of its audit jurisdiction is a necessary part of the
Commission's constitutional mandate to examine and audit the
government as well as non-government entities that receive subsidies from
it. To insist on petitioners' argument would be to impede the Commission
on Audit's exercise of its powers and functions.

This Court upheld the competence of the Commission on Audit to

determine the status of an entity as a government-owned or controlled
corporation in Feliciano v. Commission on Audit[63] and Boy Scouts of the
Philippines,[64] among others. In these cases, the Court took cognizance of
petitions assailing the Commission on Audit's determination that Leyte
Metropolitan Water District and Boy Scouts of the Philippines are
government-owned or controlled corporations, and are thus subject to the
Commission's audit jurisdiction.

III

The Commission on Audit's power to determine whether an entity is a

government-owned or controlled corporation is already settled. We thus
proceed to resolve the issue of whether the Corregidor Foundation, Inc. is a
government-owned or controlled corporation under the audit jurisdiction
of the Commission on Audit.

The term "government-owned or controlled corporation" is defined in

several laws. Presidential Decree No. 2029, issued by then President
Ferdinand E. Marcos, defines a government-owned or controlled
corporation in Section 2, thus:

SECTION 2. Definition. — A government-owned or controlled corporation

is a stock or a non-stock corporation, whether performing governmental or
proprietary functions, which is directly chartered by a special law or if
organized under the general corporation law is owned or controlled by the
government directly, or indirectly through a parent corporation or
subsidiary corporation, to the extent of at least a majority of its outstanding
capital stock or of its outstanding voting capital stock;

Provided, that a corporation organized under the general corporation law

under private ownership at least a majority of the shares of stock of which
were conveyed to a government financial institution, whether by a
foreclosure or otherwise, or a subsidiary corporation of a government
corporation organized exclusively to own and manage, or lease, or operate
specific physical assets acquired by a government financial institution in
satisfaction of debts incurred therewith, and which in any case by
enunciated policy of the government is required to be disposed of to private
ownership within a specified period of time, shall not be considered a
government-owned or controlled corporation before such disposition and
even if the ownership or control thereof is subsequently transferred to
another government-owned or controlled corporation;

Provided, further, that a corporation created by special law which is

explicitly intended under that law for ultimate transfer to private ownership
under certain specified conditions shall be considered a government-owned
or controlled corporation, until it is transferred to private ownership; and

Provided, finally, that a corporation that is authorized to be established by

special law, but which is still required under that law to register with the
Securities and Exchange Commission in order to acquire a juridical
personality, shall not on the basis of the special law alone be considered a
government-owned or controlled corporation.
The Administrative Code, in section 2(13) of its Introductory Provisions,
defines a government-owned or controlled corporation in this wise:

SECTION 2. General Terms Defined. — Unless the specific words of the

text, or the context as a whole, or a particular statute, shall require a
different meaning:

....
   
Government-owned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature,
and owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock corporations,
(13
to the extent of at least fifty-one (51) per cent of its capital
)
stock: Provided, That government-owned or controlled corporations
may be further categorized by the Department of the Budget, the Civil
Service Commission, and the Commission on Audit for purposes of the
exercise and discharge of their respective powers, functions and
responsibilities with respect to such corporations.
In Republic Act No. 10149, otherwise known as the GOCC Governance Act
of 2011, the term is defined in Section 3(o):
SECTION 3. Definition of Terms. —

....
   
Government-Owned or -Controlled Corporation (GOCC) refers to any
agency organized as a stock or nonstock corporation, vested with
functions relating to public needs whether governmental or proprietary
in nature, and owned by the Government of the Republic of the
(o) Philippines directly or through its instrumentalities either wholly or,
where applicable as in the case of stock corporations, to the extent of at
least a majority of its outstanding capital stock: Provided, however,
That for purposes of this Act, the term "GOCC" shall include GICP/GCE
and GFI as defined herein.
Based on the above provisions, an entity is considered a government-owned
or controlled corporation if all three (3) attributes are present: (1) the entity
is organized as a stock or non-stock corporation;[65] (2) its functions are
public in character;[66] and (3) it is owned[67] or, at the very least,
controlled[68] by the government.

Examples of government-owned or controlled corporations are the Leyte

Metropolitan Water District and the Boy Scouts of the Philippines. As
found in Feliciano, the Leyte Metropolitan Water District is a stock
corporation organized under an original charter or special law, i.e.,
Presidential Decree No. 198 or the Provincial Water Utilities Act of 1973. It
performs a public service by providing water to its water district and, as a
local water utility, it is controlled by the government considering that its
directors are appointed by the head of the local government unit. It was
in Feliciano where this Court said that "the determining factor of the
[Commission on Audit's] audit jurisdiction is government ownership or
control of the corporation."[69]

As for the Boy Scouts of the Philippines, this Court held in Boy Scouts of
the Philippines v. Commission on Audit[70] that it is a non-stock corporation
created under an original charter, specifically, Commonwealth Act No. 111.
Its functions primarily involve implementing the state policy provided in
Article II, Section 13 of the Constitution on promoting and protecting the
well-being of the youth; and that it is an attached agency of the then
Department of Education, Culture, and Sports, now Department of
Education.
In contrast, the Philippine Society for the Prevention of Cruelty to Animals,
the Manila Economic and Cultural Office, and the Executive Committee of
the Metro Manila Film Festival were all declared not subject to the audit
jurisdiction of the Commission on Audit. The Court in Philippine Society
for the Prevention of Cruelty to Animals v. Commission on Audit [71] held
that the petitioner corporation, though created through an original charter,
eventually became a private corporation when its "sovereign powers" to
arrest offenders of animal welfare laws and the power to serve processes in
connection therewith were withdrawn via an amendatory law. The second
attribute—the public character of the corporation's functions—was
therefore absent. It was in Philippine Society for the Prevention of Cruelty
to Animals where the Court held that "[t]he true criterion. . . to determine
whether a corporation is public or private is found in the totality of the
relation of the corporation to the State,"[72] adding that "[if] the corporation
is created by the State as the latter's own agency or instrumentality to help
it in carrying out its governmental functions, then that corporation is
public; otherwise, it is private."[73]

The Manila Economic and Cultural Office is a non-stock corporation

performing certain "'consular and other functions' relating to the
promotion, protection and facilitation of Philippine interests in
Taiwan."[74] However, none of its members, officers or trustees were found
to be government appointees or public officers designated by reason of
their office. Because of the absence of the third attribute, i.e., government
ownership or control, this Court held in Funa v. Manila Economic and
Cultural Office[75] that respondent corporation was not a government-
owned or controlled corporation. Instead, it was declared a "sui generis
entity" whose accounts were nevertheless subject to the audit jurisdiction of
the Commission on Audit because it receives funds on behalf of the
government.

As for the Executive Committee of the Metro Manila Film Festival, the
Court declared that is not a government-owned or controlled corporation
in Fernando v. Commission on Audit[76] because it was not organized either
as a stock or a non-stock corporation. Despite the absence of the first
element, the Court held that it is subject to the audit jurisdiction of the
Commission on Audit because it receives its funds from the government.

Taking the foregoing into consideration, we rule that the Corregidor

Foundation, Inc. is a government-owned or controlled corporation under
the audit jurisdiction of the Commission on Audit.

Corregidor Foundation, Inc. was organized as a non-stock corporation

under the Corporation Code. It was issued a certificate of registration [77] by
the Securities and Exchange Commission on October 28, 1987 and,
according to its Articles of Incorporation,[78] Corregidor Foundation, Inc.
was organized and to be operated in the public interest:

NINTH: That the Foundation is organized and shall be operated in the

public interest and shall have no capital stock, no premium profit, and shall
devote all of its income from whatever source including gifts, donations,
grants, subsidies or other form of philantrophy (sic) and income derived
from business - gate receipts, tourists, [and] entrance fees to the
accomplishment of the purpose enumerated herein.[79]
Corregidor Foundation, Inc. was organized primarily to maintain and
preserve the war relics in Corregidor and develop the area's potential as an
international and local tourist destination. Its Articles of Incorporation
provides the following purposes:

SECOND: That the purposes for which the Foundation is formed are as
follows:

1. To maintain and preserve war relics on Corregidor Island and the

development of its potentials as an international and local tourist
destination, and to that end and purpose, to promote and encourage the
recovery, collection, preservation, restoration and protection of materials
and objects, including land and buildings, forming part or otherwise
depicting the historic character and role of the island fortress in the defense
of the country's territorial integrity and sovereignty, such as but not limited
to maps, sketches, drawings, flags, documents, books and military
armaments, equipment and facilities.

2. To enter into, make, perform and carry out of (sic) cancel and rescind
contracts of every kind and for any lawful purpose with any person, firm,
association, corporation, entity, domestic or foreign, or others, in which it
has a lawful interest.

3. To acquire, purchase, own, hold, operate, develop, lease, mortgage,

pledge, exchange, sell, transfer, or otherwise in any manner permitted by
law, real and personal property of every kind and description or any
interest therein as may be necessary to carry out its purposes.

4. To raise or borrow money for any of the purposes of the Foundation and
from time to time without limits as to amount to draw, make, accept,
endorse, guarantee, execute and issue promisory (sic) notes, drafts, bills of
exchange, warrants, debentures, and other negotiable or non-negotiable
instruments and evidence of indebtedness, and to secure the payment
thereof, and of the interest thereon by mortgage on, or pledge, conveyance
or assignment in trust of the whole or any part of the assets of the
Foundation, real, personal, or mixed, including contract rights, whether at
the time owned or thereafter acquired; and to sell[,] pledge, or otherwise
dispose of such securities or other obligations for the Foundation in
furtherance of its purposes.

5. To invest funds as it may be able to obtain from donations, grants, or

loans and from all other sources, in securities or properties from the return
of which the foundation hopes to subsist and carry on the activities and
purposes for which it was organized.

6. In general, to carry on any activity and to have and exercise any and all of
the powers conferred by law, and to do any and all acts and things herein
set forth to the same extent as juridical persons could do, and in any part of
the world, as principal, factor, agent or otherwise either alone, or in
syndicate, partnership, association or corporation, domestic or foreign, and
to establish and maintain offices and agencies and to exercise all or any of
its corporate powers and rights within the Philippines or abroad, as may be
directly or indirectly incidental or conducive to the attainment of the above-
mentioned purposes.[80]
The enumeration shows that Corregidor Foundation, Inc.'s purposes are
related to the promotion and development of tourism in the country, a
declared state policy[81] and, therefore, a function public in character.

When Corregidor Foundation, Inc. was organized, all of its incorporators

were government officials, to wit: (1) Jose Antonio U. Gonzalez, Secretary
of Tourism; (2) Rafael Ileto, Secretary of National Defense; (3) General
Fidel Ramos, Chief of Staff; (4) Dominador O. Reyes, Undersecretary of
Tourism for Internal Services; and (5) Atty. Ramon Binamira, General
Manager, Philippine Tourism Authority. [82]

Corregidor Foundation, Inc.'s Articles of Incorporation also require that the

members of its Board of Trustees be all government officials and shall so
hold their position as members of the Board by reason of their office:

SIXTH: That the affairs of the Foundation shall be administered and

governed by the Board of Trustees composed of seven (7) members who are
to serve until their successors are chosen or elected and qualified as
provided by the By-Laws and their names, nationalities, residences and
official address are as follows:

Name Citizenship Address

     
HON. JOSE ANTONIO U. ...
GONZALEZ
Filipino
 DOT Bldg., Kalaw Street,
 Secretary of Tourism Ermita, Manila
HON. RAFAEL ILETO ...
Filipino
 Secretary of National Camp Emilio Aguinaldo
Defense Quezon City
GENERAL FIDEL ...
RAMOS
Filipino
 Camp Crame, Quezon
 Chief of Staff City
MS. BETH DAY
Filipino ...
ROMULO
MS. NINI QUEZON
Filipino ...
AVANCEÑA
U.S. Embassy Roxas
MR. NICHOLAS PLATT American
Blvd., Metro Manila
ATTY. RAMON
BINAMIRA ...
Filipino
 General Manager,  DOT Bldg., Kalaw Street
Philippine Tourism Ermita, Manila
Authority

Provided, however, that the abovenamed government officials shall hold

their position as members of the Board by reason of their respective offices.

Provided, further, that a representative of the Department of Science and

Technology or any other governmental agency which may succeed to the
functions of said agency shall be allowed to sit with the Board of Trustees of
the Foundation as Department of Science and Technology representative
therein.[83]
There is no showing that these requirements were ever amended.

As the foregoing established, the government has substantial participation

in the selection of Corregidor Foundation, Inc.'s governing board. [84] The
government controls Corregidor Foundation, Inc. making it a government-
owned or controlled corporation.

Petitioners nevertheless contend that Corregidor Foundation, Inc. is not a

government-owned or controlled corporation because it was not organized
as a stock corporation and was incorporated under a general law, not a
special law or an original charter.

These arguments are wrong. Even a cursory reading of the statutory

definitions of "government owned-or controlled corporation" readily
reveals that a non-stock corporation may be government-owned or
controlled. These definitions begin with "a government-owned or
controlled corporation"[85] and refers to a "stock or non-stock
corporation. . ."[86] Furthermore, there is nothing in the law which provides
that government-owned or controlled corporations are always created
under an original charter or special law. As held in Feliciano, there are
government-owned or controlled corporations without an original charter,
that is, those created under the Corporation Code.[87]

It is immaterial whether a corporation is private or public for purposes of

exercising the audit jurisdiction of the Commission on Audit. So long as the
government owns or controls the corporation, as in this case, the
Commission on Audit may audit the corporation's accounts. In Feliciano:

[T]he constitutional criterion on the exercise of [the Commission on

Audit's] audit jurisdiction depends on the government's ownership or
control of a corporation. The nature of the corporation, whether it is
private, quasi-public, or public is immaterial.

The Constitution vests in the [Commission on Audit] audit jurisdiction

over "government-owned and controlled corporations with original
charters," as well "government-owned or controlled corporations" without
original charters. [Government-owned or controlled corporations] with
original charters are subject to [the Commission's] pre-audit, while
[government-owned or controlled corporations] without original charters
are subject to [the Commission's] post-audit. [Government-owned or
controlled corporations] without original charters refer to corporations
created under the Corporation Code but are owned or controlled by the
government. The nature or purpose of the corporation is not material in
determining [the Commission's] audit jurisdiction. Neither is the manner
of creation of a corporation, whether under a general or special law.
[88]
 (Emphasis supplied)
Just because the employees of Corregidor Foundation, Inc. are not under
the jurisdiction of the Civil Service Commission does not mean that
Corregidor Foundation, Inc. is not government-owned or controlled. Article
IX-B, Section 2(1)[89] of the Constitution is clear that the jurisdiction of the
Civil Service Commission is over government-owned or controlled
corporations with original charters, not over those without original charters
like Corregidor Foundation, Inc. Addressing a similar argument, this Court
in Davao City Water District v. Civil Service Commission,[90] cited in
Feliciano, said that:

By "government-owned or controlled corporation with original charter,"

We mean government owned or controlled corporation created by a special
law and not under the Corporation Code of the Philippines. Thus, in the
case of Lumanta v. NLRC (G.R. No. 82819, February 8, 1989, 170 SCRA 79,
82), We held:

"The Court, in National Service Corporation (NASECO) v. National Labor

Relations Commission, G.R. No. 69870, promulgated on 29 November
1988, quoting extensively from the deliberations of the 1986 Constitutional
Commission in respect of the intent and meaning of the new phrase 'with
original charter,' in effect held that government-owned and controlled
corporations with original charter refer to corporations chartered by
special law as distinguished from corporations organized under our
general incorporation statute - the Corporation Code. In NASECO, the
company involved had been organized under the general incorporation
statute and was a subsidiary of the National Investment Development
Corporation (NIDC) which in turn was a subsidiary of the Philippine
National Bank, a bank chartered by a special statute. Thus, government-
owned or controlled corporations like NASECO are effectively, excluded
from the scope of the Civil Service." (Emphasis supplied)
From the foregoing pronouncement, it is clear that what has been excluded
from the coverage of the [Civil Service Commission] are those corporations
created pursuant to the Corporation Code.[91]
Also, there is no proof that Corregidor Foundation, Inc.'s funding primarily
comes from grants and donations of international organizations or foreign
entities as petitioners contend. On the contrary, for the period audited by
the Commission on Audit or in 2003, 99.66% of Corregidor Foundation,
Inc.'s budget or Four Hundred Twenty-Three Million, One Hundred Sixty-
Four Thousand, One Hundred Fifteen Pesos (P423,164,115.00) came from
the government, specifically, from the Department of Tourism, Duty Free
Philippines, and the Philippine Tourism Authority.[92] This was never
controverted by petitioners.

Indeed, the following provisions of the September 3, 1996 Memorandum of

Agreement indubitably show that Corregidor Foundation, Inc. is funded by
the government through the Philippine Tourism Authority. Corregidor
Foundation, Inc. is required to submit its budget for approval of the
Philippine Tourism Authority. It even voluntarily submitted itself to the
audit jurisdiction of the Commission on Audit:

MEMORANDUM OF AGREEMENT
CORREGIDOR ISLAND MANAGEMENT

KNOW ALL MEN BY THESE PRESENTS:

This Agreement made and entered into this 3rd day of September, 1996 by
and between:

The PHILIPPINE TOURISM AUTHORITY, a government owned

corporation with office address at DOT Building, Kalaw, Ermita, Manila,
represented herein by its General Manager, EDUARDO T. JOAQUIN,
hereinafter referred to as AUTHORITY;

-and-

CORREGIDOR FOUNDATION, INC., a private nonstock, non-profit

corporation existing and doing business under the laws of the Philippines
with office address at Tourism Building, T. M. Kalaw Street, Ermita,
Manila, represented herein by its Executive Director, ALFRED A. X.
BURGOS, SR., hereinafter referred to as FOUNDATION;

-WITNESSETH-

WHEREAS, pursuant to a Memorandum of Agreement, referred to as

ANNEX I, the then Ministry of National Defense ceded and conveyed
Corregidor Island to the Department of Tourism/Philippine Tourism
Authority for tourist development purposes;

WHEREAS, consistent with the avowed objective of the abovementioned

Memorandum of Agreement, the FOUNDATION was eventually organized
for private concern to work hand in hand with the government in
enhancing the touristic potentials of the Island referred to as ANNEX II;

WHEREAS, the parties in order to further accelerate the desired

development find it necessary to transfer the management of the Island to
the FOUNDATION for the purpose of centralizing its planning and
development;

WHEREAS, the AUTHORITY, cognizant of the inability of the

FOUNDATION to source fund for the purpose, hereby assumes
responsibility of providing the budgetary requirements that will enable the
latter to perform the mandate it has received from the former under this
agreement;

NOW, THEREFORE, for and in consideration of the foregoing premises

and covenants and undertakings hereinafter setforth (sic), parties hereto
agreed to the following:

1. PTA hereby authorizes FOUNDATION to manage and operate

CORREGIDOR ISLAND including all existing facilities therein;

2. FOUNDATION shall use, manage and operate the aforesaid Island

together with its facilities in order to update and standardize its
service systems;

....
 4. Upon execution of the Agreement, AUTHORITY shall release an
operating fund as financial assistance to the FOUNDATION
equivalent to three (3) months operating expenses based on the
present budget provided for the Island by FOUNDATION. It is
understood that with the execution of this Agreement, FOUNDATION
shall submit a budget for Corregidor Island for AUTHORITY'S
approval. Within five (5) days of the first month and every month
thereafter, the equivalent of two (2) months operating fund based on
the approved budget shall be released by AUTHORITY. Releases of
the operating fund shall be scheduled in such manner that
FOUNDATION shall always have at its disposal three (3) months
operating fund.

FOUNDATION shall submit an annual report on receipts and

disbursements of AUTHORITY funds on or before the 15th day of the
first month of each year, duly approved and certified by the
Executive Director. Said report shall be subject n to audit by
AUTHORITY Internal Auditor and Commission on Audit.

....

6. All collections of revenue shall be taken up in the books of the

FOUNDATION as accountability to AUTHORITY and to be deposited
by FOUNDATION in a distinct and separate account in the name of
Corregidor Island, the disposition of which shall be as per approved
annual budget of the FOUNDATION whether for Capital
Expenditures and for Operating Expenses.[93] (Emphasis supplied)

At any rate, even if it were true that Corregidor Foundation, Inc. is funded
by international organizations and foreign entities, these foreign grants
already became public funds the moment they were donated to Corregidor
Foundation, Inc. Thus, these funds may be audited by the Commission on
Audit. The Court elucidated in Fernando v. Commission on Audit:[94]

[D]espite the private source of funds, ownership over the same was already
transmitted to the government by way of donation. As donee, the
government had become the owner of the funds, with full ownership rights
and control over the use and disposition of the same, subject only to
applicable laws and COA rules and regulations. Thus, upon donation to the
government, the funds became public in character.
This is in contrast to cases where there is no transfer of ownership over the
funds from private parties to the government, such as in the case of cash
deposits required in election protests filed before the trial courts,
Commission on Elections, and electoral tribunals. In these cases, the
government becomes a mere depositary of such fund, the use and
disposition of which is subject to the conformity of the private party-
depositor who remains to be the owner thereof.[95]
Lastly, while it is true that just like any other corporation organized under
the Corporation Code, Corregidor Foundation, Inc. may determine
voluntarily and solely the successors of its members in accordance with its
own by-laws, this does not change the public character of its functions and
the control the government has over it. As discussed, the promotion and
development of tourism is a public function and, as provided in its Articles
of Incorporation, the members of Corregidor Foundation, Inc. must be
government officials who shall hold their membership by reason of their
office.

In sum, Corregidor Foundation, Inc. is a government-owned or controlled

corporation. Thus, it is under the audit jurisdiction of the Commission on
Audit.

IV

There are cases where this Court, despite the disallowance by the
Commission on Audit, nevertheless enjoined the refund of the disallowed
amounts.[96] In these instances, this Court found that the parties received
the disallowed amounts in good faith, defined as "that state of mind
denoting honesty of intention, and freedom from knowledge of
circumstances which ought to put the holder upon inquiry."[97] It also
means "an honest intention to abstain from taking any unconscientious
disadvantage of another, even though technicalities of law, together with
the absence of all information, notice, or benefit or belief of facts which
render transactions unconscientious."[98]

Here, we cannot ascribe good faith to petitioners in receiving the disallowed

amounts. Department of Budget and Management Circular No. 2003-5 is
clear that only the following are entitled to honoraria:
4. General Guidelines

teaching personnel of the Department of Education, Commission on

Higher Education, Technical Education and Skills Development
Authority, State Universities and Colleges and other educational
4.1.
institutions engaged in actual classroom teaching whose teaching load
is outside of the regular office hours and/or in excess of the regular
load;
those who act as lecturers, resource persons, coordinators and
facilitators in seminars, training programs and other similar activities
4.2
in training institutions, including those conducted by entities for their
officials and employees; and
chairs and members of Commissions/Board Councils and other similar
entities which are hereinafter referred to as a collegial body including
4.3.the personnel thereof, who are neither paid salaries nor per diems but
compensated in the form of honoraria as provided by law, rules and
regulations.[99]
It is obvious that Corregidor Foundation, Inc. is not an educational
institution and petitioners are not its teaching personnel. Neither are
petitioners lecturers by virtue of their positions in Corregidor Foundation,
Inc. nor are there laws or rules allowing the payment of honoraria to
personnel of the Corregidor Foundation, Inc.

Finally, petitioners knew fully well that they serve in Corregidor

Foundation, Inc. by reason of their office in the Philippine Tourism
Authority. It is also undisputed that petitioners, as officers and personnel of
the Philippine Tourism Authority, already received honoraria and cash
gifts. Considering that this Court pronounced as early as 1991 in Civil
Liberties Union v. The Executive Secretary[100] that an ex-officio position is
"actually and in legal contemplation part of the principal
office,"[101] receiving another set of honoraria and cash gift for rendering
services to the Corregidor Foundation, Inc. would be tantamount to
payment of additional compensation proscribed in Article IX-B, Section 8
of the Constitution. These circumstances negate any claim of good faith.

The present case is different from Blaquera v. Alcala[102] and De Jesus v.

Commission on Audit[103] where this Court enjoined the refund of the
disallowed amounts. Both cases had ostensible legal bases on which the
recipients honestly believed that the disallowed amounts paid were due to
them.
In Blaquera, productivity incentive benefits of not less than P2,000.00
were given to employees of the Philippine Tourism Authority in 1991. The
grant was made on the basis of Administrative Order No. 268, series of
1992. The next year, productivity incentive benefits were again granted, but
a subsequently issued Administrative Order No. 29, series of 1993 ordered
a forced refund of productivity incentive benefits that were more than
P1,000.00. This Court upheld the validity of Administrative Order No. 29,
the latter's issuance being part of the power of control of the President.
However, this Court enjoined the refund of the disallowed amounts because
the employees received the benefits "in the honest belief that the amounts
given were due. . . and the latter accepted the same with gratitude,
confident that they richly deserve such benefits."[104] In Blaquera,
Administrative Order No. 268 ostensibly authorized the payment of the
productivity incentive benefits.

In De Jesus, allowances and bonuses were given to the members of the
Interim Board of Directors of the Catbalogan Water District on the basis of
the Local Water Utilities Administration's Resolution No. 313, series of
1995. The Commission on Audit disallowed the payment because, according
to Section 13 of the Provincial Water Utilities Act of 1973, directors of local
water utilities shall only receive per diems. This Court affirmed the
disallowance but held that the recipients "need not refund the [disallowed]
allowances and bonus they received[.]"[105] In De Jesus, Local Water
Utilities Administration's Resolution No. 313, series of 1995 ostensibly
authorized the payment of the allowances and bonuses.

Unlike in Blaquera and De Jesus, no such ostensible legal basis was

presented in this case. There was no reason for petitioners to honestly
believe that another set of honoraria and cash gifts, by reason of their ex-
officio positions in Corregidor Foundation, Inc., were due them. It cannot
be said that they received the disallowed amounts in good faith.

All told, Corregidor Foundation, Inc. is a government-owned or controlled

corporation. It is subject to Department of Budget and Management
Circular No. 2003-5 limiting the payment of honoraria to certain personnel
of the government. Furthermore, petitioners, being employees of the
Philippine Tourism Authority, are public officers prohibited from receiving
additional, double or indirect compensation as per Article IX-B, Section 8
of the Constitution. The Commission on Audit did not gravely abuse its
discretion in disallowing the payment of honoraria and cash gift to
petitioners.

WHEREFORE, the Petition for Certiorari is DISMISSED.

SO ORDERED.

Bersamin, C. J., Carpio, Peralta, Del Castillo, Perlas-Bernabe, A. Reyes,

Jr., Gesmundo, J. Reyes, Jr., Hernando, Lazaro-Javier, and Inting, JJ.,
concur.
Jardeleza, J., no part.
Caguioa, and Carandang, JJ., on official leave.

NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on June 4, 2019 a Decision, copy attached herewith,
was rendered by the Supreme Court in the above-entitled case, the original
of which was received by this Office on July 29,2019 at 1:28 p.m.

Very truly yours,

(SGD) EDGAR
O. ARICHETA
  Clerk of Court

Case No. 3
MWSS V. QC (CASE DIGEST. G.R. NO.
194388)

CASE DIGEST: [ G.R. No. 194388, November

07, 2018 ] METROPOLITAN WATERWORKS SEWERAGE SYSTEM,
PETITIONER, VS. THE LOCAL GOVERNMENT OF QUEZON CITY,
CITY TREASURER OF QUEZON CITY, CITY ASSESSOR OF QUEZON
CITY, SANGGUNIANG PANLUNGSOD NG QUEZON CITY, AND CITY
MAYOR OF QUEZON CITY, RESPONDENTS. DECISION. LEONEN, J.:

SUMMARY: A government instrumentality exercising corporate powers is not

liable for the payment of real property taxes on its properties unless it is alleged
and proven that the beneficial use of its properties been extended to a taxable
person.

FACTS: Sometime in July 2007, MWSS received several Final Notices of Real

Property Tax Delinquency from the Local Government of Quezon City, covering
various taxable years, at P237,108,043.83 on the real properties owned by MWSS
in Quezon City. The Local Government of Quezon City warned it that failure to
pay would result in the issuance of warrants of levy against its properties.

On August 7, 2007, the Treasurer's Office of Quezon City issued Warrants of Levy
on the properties due to MWSS's failure to pay.

On September 10, 2007, the Local Government of Quezon City listed properties
owned by MWSS for auction sale.

Petition for Certiorari and Prohibition TRO prayer by MWSS. Argued that its real
properties in Quezon City were exclusively devoted to public use, and thus, were
exempt from real property tax.

CA issued TRO stopping auction sale. Writ of Preliminary Injunction issued.

CA denied petition. Lifted injuction.

CA said MWSS need not exhaust administrative remedies re a purely legal
question. CA did not dismiss on this ground.

CA said since MWSS was not a municipal corporation, it could not invoke the
immunity granted in Section 133(o) of the Local Government Code. Found that
even if MWSS was an instrumentality of the government, it was not performing a
purely governmental function. Thus, no immunity.
CA said taxed properties were not part of the public dominion, but were even
made the subject of concession agreements between MWSS and private
concessionaires due to its privatization in 1997. Proprietary functions; thus,
subject to real property tax.

QC issued warrants of levy. MWSS went to the SC. SC issued TRO.

ISSUES:

1. Whether there is violation of the principle of hierarchy of

courts;
2. Whether there is a difference between a government
instrumentality and a GOCC;
3. Whether MWSS is an instrumentality of the Republic.
Otherwise, whether it is a GOCC;
4. Whether MWSS is exempt from realty taxes

HELD: PETITION GRANTED; MWSS DECLARED EXEMPT.

FIRST ISSUE: The principle of the hierarchy of courts is a judicial policy

designed to restrain direct resort to the Supreme Court if relief can be granted or
obtained from the lower court. It may also be invoked when a direct resort to the
CA is made without going through the RTC.

The Court of Appeals has full discretion on whether to give due course to any
petition for certiorari directly filed before it. In this case, it allowed petitioner's
direct resort to it on the ground that the issue presented was a pure question of
law. No error can be ascribed to it for passing upon the issue.
SECOND ISSUE: Under the Local Government Code, local government units
are granted the power to levy taxes on real property not otherwise exempted
under the law.

Under Section 234(a), the general rule is that any real property owned by the
Republic or its political subdivisions is exempt from the payment of real property
tax "except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person." The implication is that real property, even if
owned by the Republic or any of its political subdivisions, may still be subject to
real property tax if the beneficial use of the real property was granted to a taxable
person.

A government instrumentality is exempt from the local government unit's levy of

real property tax. The government instrumentality must not have been organized
as a stock or non-stock corporation, even though it exercises corporate powers,
administers special funds, and enjoys operational autonomy, usually through its
charter. Its properties are exempt from real property tax because they are
properties of the public dominion: held in trust for the Republic, intended for
public use, and cannot be the subject of levy, encumbrance, or disposition.

A government-owned and controlled corporation, on the other hand,

is not exempt from real property taxes due to the passage of the Local
Government Code.

Guided by these parameters, this Court now determines whether petitioner is a

government instrumentality exercising corporate powers or a government-owned
and controlled corporation.
THIRD ISSUE: MWSS is a government owned and controlled corporation.

Petitioner MWSS was created in 1971 by Republic Act No. 6234, initially without
any capital stock. Under its Charter, petitioner was explicitly declared exempt
from the payment of real property taxes.

In 1974, however, Presidential Decree No. 425 amended the Charter and
converted petitioner into a stock corporation.

MWSS is an attached agency of the Department of Public Works and Highways,

but exercises corporate functions and maintains operational autonomy as it was
granted certain attributes, powers and functions.
To be categorized as a government-owned and -controlled corporation, a
government agency must meet the two (2) requirements prescribed in Article XII,
Section 16 of the Constitution: common good and economic viability.

MWSS was created by Congress with the mandate to provide potable water to
Metro Manila, Rizal, and a portion of Cavite. Undoubtedly, its creation was for
the benefit of the common good. With the passing of the National Water Crisis
Act of 1995 and petitioner's subsequent privatization, any contract that petitioner
undertakes with private concessionaires must be assessed for its market
competitiveness or, otherwise stated, for economic viability.

Under its Charter, petitioner is given the power to "acquire, purchase, hold,
transfer, sell, lease, rent, mortgage, encumber, and otherwise dispose" of its real
property. Properties held by petitioner under the exercise of this power,
therefore, cannot be considered properties of the public dominion.

MWSS is a government owned and controlled corporation. Under the Local

Government Code, only its machinery and equipment actually, directly, and
exclusively used in the supply and distribution of water can be exempt from the
levy of real property taxes. Its powers, functions, and attributes are more akin to
that of the National Power Corporation, which was previously held by the Court
as a taxable entity.

FOURTH ISSUE: Under Executive Order No. 596, petitioner is categorized

with other government agencies that were found to be exempt from the payment
of real property taxes.

Under Republic Act No. 10149 or the GOCC Governance Act of 2011, petitioner is
exempt from the payment of real property taxes.

Hence, petitioner's real property tax exemption under Republic Act No.
6234[81] is still valid as the proviso of Section 234[82] of the Local Government
Code is only applicable to government-owned and -controlled corporations.

Thus, petitioner is not liable to respondent Local Government of Quezon City

for real property taxes, except if the beneficial use of its properties has been
extended to a taxable person.
Respondents have not alleged that the beneficial use of any of petitioner's
properties was extended to a taxable person. In the absence of any allegation to
the contrary, petitioner's properties in Quezon City are not subject to the levy of
real property taxes.

Case No. 4

ECOND DIVISION

G.R. No. 205925, June 20, 2018

BASES CONVERSION AND DEVELOPMENT

AUTHORITY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

REYES, JR., J.:

This petition for review on certiorari1 under Rule 45 of the Rules of Court seeks to
reverse and set aside the Decision2 dated August 29, 2012 and Resolution3 dated
February 12, 2013 of the Court of Tax Appeals (CTA) En Banc in CTA EB Case No. 797,
which affirmed the CTA First Division's dismissal of the case filed by herein petitioner
Bases Conversion and Development Authority (BCDA) on the ground that the latter
failed to pay docket fees as required under Rule 141 of the Rules of Court.

The Facts

The facts, as summarized by the CTA En Banc, read as follows:

On October 8, 2010, BCDA filed a petition for review with the CTA in order to preserve
its right to pursue its claim for refund of the Creditable Withholding Tax (CWT) in the
amount of Php122,079,442.53, which was paid under protest from March 19, 2008 to
October 8, 2008. The CWT which BCDA paid under protest was in connection with its
sale of the BCDA-allocated units as its share in the Serendra Project pursuant to the
Joint Development Agreement with Ayala Land, Inc. 4

The petition for review was filed with a Request for Exemption from the Payment of
Filing Fees in the amount of Php1,209,457.90. 5

On October 20, 2010, the CTA First Division denied BCDA's Request for Exemption and
ordered it to pay the filing fees within five days from notice. 6
BCDA moved for reconsideration which was denied by the CTA First Division on
February 8, 2011. BCDA was once again ordered to pay the filing fees within five days
from notice, otherwise, the petition for review will be dismissed. 7

BCDA filed a petition for review with the CTA En Banc on February 25, 2011, which
petition was returned and not deemed filed without the payment of the correct legal
fees. BCDA once again emphasized its position that it is exempt from the payment of
such fees.8

On March 28, 2011, the petition before the CTA First Division was dismissed. BCDA
attempted to tile its Motion for Reconsideration, however, the Officer-In-Charge of the
First Division refused to receive the checks for the payment of the filing fees, and the
Motion for Reconsideration. BCDA then filed its Motion for Reconsideration by registered
mail.9

Subsequently, BCDA filed a manifestation stating the incidents relating to the tiling of
its Motion for Reconsideration. The CTA First Division, on April 26, 2011, issued its
Resolution,10 the dispositive portion of which states:

WHEREFORE, finding no reason to deny receipt of the supposed Motion for

Reconsideration of the [BCDA] on the dismissal of its Petition for Review, the Executive
Clerk of Court III of this Division, Atty. Margarette Y. Guzman, is hereby DIRECTED to
allow petitioner BCDA to file the same, or to accept said pleading which was allegedly
mailed through registered mail, upon receipt thereof, and to commence the procedure
in paying the prescribed docket fees, subject to the caveat herein stated, should
petitioner BCDA decide to pursue its case.

SO ORDERED.11

On May 17, 2011, BCDA moved for reconsideration of the Resolution dated April 26,
2011 and prayed that it be allowed to pay the prescribed docket fees of
Php1,209,457.90 without qualification. On June 9, 2011, the CTA First Division denied
both motions for reconsideration.12

On June 28, 2011, BCDA filed a petition for review with the CTA En Banc but the same
was dismissed. In its assailed Decision13 dated August 29, 2012, it adopted and
affirmed the findings of the First Division, to wit:

BCDA fails to raise any new and substantial arguments, and no cogent reason exists to
warrant a consideration of the Court's Resolution dated March 28, 2011 dismissing its
Petition for Review.

It must be emphasized that payment in full of docket fees within the prescribed period
is mandatory. It is an essential requirement without which the decision appealed from
would become final and executory as if no appeal had been filed. To repeat, in both
original and appellate cases, the court acquires jurisdiction over the case only upon the
payment of the prescribed docket fees.
In this case, due to BCDA's non-payment of the prescribed legal fees within the
prescribed period, this Court has not acquired jurisdiction over the case. Consequently,
it is as if no appeal was ever filed with this Court. 14

Undeterred, BCDA filed a Motion15 for Reconsideration but was likewise denied by the
CTA En Banc in the assailed Resolution16 dated February 12, 2013.

Hence, this petition.

The Issues

I.

THE CTA EN BANC ERRED IN AFFIRMING THE CTA FIRST DIVISION'S RULING THAT
BCDA IS NOT A GOVERNMENT INSTRUMENTALITY, HENCE, NOT EXEMPT FROM
PAYMENT OF LEGAL FEES.

II.

THE CTA EN BANC ERRED IN AFFIRMING CTA FIRST DIVISION'S RESOLUTION

DISMISSING BCDA'S PETITION FOR REVIEW FOR NON-PAYMENT OF THE PRESCRIBED
LEGAL FEES WITHIN THE REGLEMENTARY PERIOD.

Ruling of the Court

The petition is impressed with merit.

BCDA is a government instrumentality vested with corporate powers. As such, it is exempt

from the payment of docket fees.

At the crux of the present pet1t1on is the issue of whether or not BCDA is a
government instrumentality or a government-owned and – controlled corporation
(GOCC). [fit is an instrumentality, it is exempt from the payment of docket fees. lf it is
a GOCC, it is not exempt and as such non-payment thereof would mean that the tax
court did not acquire jurisdiction over the case and properly dismissed it for BCDA's
failure to settle the fees on time.

BCDA is a government instrumentality vested with corporate powers. As such, it is

exempt from the payment of docket fees required under Section 21, Rule 141 of the
Rules or Court, to wit:

RULE 141
LEGAL FEES

SEC. 1. Payment of fees. – Upon the filing of the pleading or other application which
initiates an action or proceeding, the fees prescribed therefor shall be paid in full.

xxxx
SEC. 21. Government exempt. – The Republic of the Philippines, its agencies and
instrumentalities, are exempt from paying the legal fees provided in this
rule. Local governments and government-owned or controlled corporations with or
without independent charters are not exempt from paying such fees. (Emphasis Ours)

Section 2(10) and (13) of the Introductory Provisions of the Administrative Code of
1987 provides for the definition of a government "instrumentality" and a "GOCC", to
wit:

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.

xxxx

(13) Government-owned or controlled corporation refers to any agency organized as a

stock or non-stock corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x.
(Emphasis Ours)

The grant of these corporate powers is likewise stated in Section 3 of Republic Act
(R.A.) No. 7227; also known as The Bases Conversion and Development Act of 1992
which provides for BCDA's manner of creation, to wit:

Sec. 3. Creation of the Bases Conversion and Development Authority. - There is hereby
created a body corporate to be known as the Bases Conversion and Development
Authority, which shall have the attribute of perpetual succession and shall be vested
with the powers of a corporation. (Emphasis Ours)

From the foregoing, it is clear that a government instrumentality may be endowed with
corporate powers and at the same time retain its classification as a government
"instrumentality" for all other purposes.

In the 2006 case of Manila International Airport Authority v. CA,17 the Court, speaking
through Associate Justice Antonio T. Carpio, explained in this wise:

Many government instrumentalities are vested with corporate powers but they do not
become stock or non-stock corporations, which is a necessary condition before an
agency or instrumentality is deemed a [GOCC]. Examples are the Mactan International
Airport Authority, the Philippine Ports Authority, the University of the Philippines
and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise
corporate powers but they are not organized as stock or non-stock corporations as
required by Section 2 (13) of the Introductory Provisions of the Administrative Code.
These government instrumentalities arc sometimes loosely called government corporate
entities. However, they are not [GOCCs] in the strict sense as understood under the
Administrative Code, which is the governing law defining the legal relationship or status
of government entities.18

Moreover, in the 2007 case of Philippine Fisheries Development Authority v. CA,19 the

Court reiterated that a government instrumentality retains its classification as such
albeit having been endowed with some if not all corporate powers. The relevant portion
of said decision reads as follows:

Indeed, the Authority is not a GOCC but an instrumentality of the government. The
Authority has a capital stock but it is not divided into shares of stocks. Also, it has no
stockholders or voting shares. Hence, it is not a stock corporation. Neither is it a non-
stock corporation because it has no members.

The Authority is actually a national government instrumentality which is define as an

agency of the national government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds and enjoying operational autonomy,
usually through a charter. 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.20

As previously mentioned, in order to qualify as a GOCC, one must be organized either

as a stock or non-stock corporation. Section 321 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.''

Section 6 of R.A. No. 7227 provides for BCDA's capitalization, to wit:

Sec. 6. Capitalization. – The Conversion Authority shall have an authorized capital of

One hundred billion pesos (P100,000,000,000.00) which may be fully subscribed by the
Republic of the Philippines and shall either be paid up from the proceeds of the sales of
its land assets as provided for in Section 8 of this Act or by transferring to the
Conversion Authority properties valued in such amount.

An initial operating capital in the amount of seventy million pesos (P70,000,000.00) is

hereby authorized to be appropriated out of any funds in the National Treasury not
otherwise appropriated which shall be covered by preferred shares of the Conversion
Authority retireable within two (2) years.

Based on the foregoing, it is clear that BCDA has an authorized capital of Php100
Billion, however, it is not divided into shares of stock. BCDA has no voting shares.
There is likewise no provision which authorizes the distribution of dividends and
allotments of surplus and profits to BCDA's stockholders. Hence, BCDA is not a stock
corporation.
Section 8 of R.A. No. 7227 provides an enumeration of BCDA's purposes and their
corresponding percentage shares in the sales proceeds of BCDA. Section 8 likewise
states that after distribution of the proceeds acquired from BCDA's activities, the
balance, if any, shall accrue and be remitted to the National Treasury, to wit:

Sec. 8. Funding Scheme.—The capital of the Conversion Authority shall come from the
sales proceeds and/or transfers of certain Metro Manila military camps, including all
lands covered by Proclamation No. 423, series of 1957, commonly known as Fort
Bonifacio and Villamor (Nicholas) Air Base x x x.

xxxx

The President is hereby authorized to sell the above lands, in whole or in part, which
are hereby declared alienable and disposable pursuant to the provisions of existing laws
and regulations governing sales of government properties: provided, that no sale or
disposition of such lands will be undertaken until a development plan embodying
projects for conversion shall be approved by the President in accordance with
paragraph (b), Sec. 4, of this Act. However, six (6) months after approval of this Act,
the President shall authorize the Conversion Authority to dispose of certain areas in Fort
Bonifacio and Villamor as the latter so determines. The Conversion Authority shall
provide the President a report on any such disposition or plan for disposition within one
(1) month from such disposition or preparation of such plan. The proceeds from any
sale, after deducting all expenses related to the sale, of portions of Metro Manila
military camps as authorized under this Act, shall be used for the following
purposes with their corresponding percent shares of proceeds:

(1) Thirty-two and five-tenths percent (35.5%) — To finance the transfer of the AFP
military camps and the construction of new camps, the self-reliance and modernization
program of the AFP, the concessional and long-term housing loan assistance and
livelihood assistance to AFP officers and enlisted men and their families, and the
rehabilitation and expansion of the AFP's medical facilities;

(2) Fifty percent (50%) — To finance the conversion and the commercial uses of the
Clark and subic military reservations and their extentions;

(3) Five Percent (5%) — To finance the concessional and long-term housing loan
assistance for the homeless of Metro Manila, Olongapo City, Angeles City and other
affected municipalities contiguous to the base areas as mandated herein: and

(4) The balance shall accrue and be remitted to the National Treasury to be

appropriated thereafter by Congress for the sole purpose of financing programs and
projects vital for the economic upliftment of the Filipino people. (Emphasis Ours)

The remaining balance, if any, from the proceeds of BCDA's activities shall be remitted
to the National Treasury. The National Treasury is not a stockholder of BCDA Hence,
none of the proceeds from BCDA's activities will be allotted to its stockholders.

BCDA also does not qualify as a non-stock corporation because it is not organized for
any of the purposes mentioned under Section 88 of the Corporation Code, to wit:
Sec. 88. Purposes. – Non-stock corporations may be formed or organized tor
charitable, religious, educational, professional, cultural, fraternal, literary, scientific,
social, civic service, or similar purposes, like trade industry, agricultural and like
chambers, or any combination thereof: subject to the special provisions of this Title
governing particular classes of non-stock corporations.

A cursory reading of Section 4 of R.A. No. 7227 shows that BCDA is organized for a
specific purpose - to own, hold and/or administer the military reservations in the
country and implement its conversion to other productive uses, to wit:

Sec. 4. Purposes of the Conversion Authority. — The Conversion Authority shall have
the following purposes:

(a) To own, hold and/or administer the military reservations of John Hay Air
Station, Wallace Air Station, O'Donnell Transmitter Station, San Miguel Naval
Communications Station. Mt. Sta. Rita Station (Hermosa, Bataan) and those portions of
Metro Manila military camps which may be transferred to it by the President:

(b) To adopt, prepare and implement a comprehensive and detailed development plan
embodying a list of projects including but not limited to those provided in the
Legislative-Executive Bases Council (LEBC) framework plan for the sound and
balanced conversion of the Clark and Subic military reservations and their
extensions consistent with ecological and environmental standards, into other
productive uses to promote the economic and social development of Central Luzon in
particular and the country in general;

(c) To encourage the active participation of the private sector in transforming

the Clark and Subic military reservations and their extensions into other
productive uses;

(d) To serve as the holding company of subsidiary companies created pursuant

to Section 16 of this Act and to invest in Special Economic Zones declared under
Sections 12 and 15 of this Act;

(e) To manage and operate through private sector companies developmental projects
outside the jurisdiction of subsidiary companies and Special Economic Zones declared
by presidential proclamations and established under this Act;

(f) To establish a mechanism in coordination with the appropriate local

government units to effect meaningful consultation regarding the plans,
programs and projects within the regions where such plans, programs and/or
project development are part of the conversion of the Clark and Subic military
reservations and their extensions and the surrounding communities as envisioned in
this Act; and

(g) To plan, program and undertake the readjustment, relocation, or

resettlement of population within the Clark and Subic military reservations
and their extensions as may be deemed necessary and beneficial by the Conversion
Authority, in coordination with the appropriate government agencies and local
government units. (Emphases Ours)

From the foregoing, it is clear that BCDA is neither a stock nor a non-stock corporation.
BCDA is a government instrumentality vested with corporate powers. Under Section
21,22 Rule 141 of the Rules of Court, agencies and instrumentalities of the Republic of
the Philippines are exempt from paying legal or docket fees. Hence, BCDA is exempt
from the payment of docket fees.

WHEREFORE, premises considered, the present petition is GRANTED. The Decision

dated August 29, 2012 and Resolution dated February 12, 2013 of the CTA En Banc are
hereby REVERSED and SET ASIDE.

Let this case be remanded to the Court of Tax Appeals for further proceedings
regarding Bases conversion and Development Authority's claim for refund of the
Creditable Withholding Tax (CWT) in the amount of P122,079,442.53 which the latter
paid under protest from March 19, 2008 to October 8, 2008.

SO ORDERED.

Case No. 5

DENNIS A.B. FUNA v. MANILA ECONOMIC, GR No. 193462, 2014-02-04

Facts:

petition for mandamus... to compel:

1.)... the Commission on Audit (COA) to audit and examine the funds of
the Manila Economic and Cultural Office (MECO), and

2.)... the MECO to submit to such audit and examination... aftermath of

the Chinese civil war... left the country of China with two (2) governments
in a stalemate espousing competing assertions of sovereignty

On one hand is the communist People's Republic of China (PROC) which...

controls the mainland territories, and on the other hand is the nationalist
Republic of China (ROC) which controls the island of Taiwan. For a better
part of the past century, both the PROC and ROC adhered to a policy of
"One China" i.e., the view that there is... only one legitimate government
in China, but differed in their respective interpretation as to which that
government is.

The number of states partial to the PROC's version of the One China
policy, however, gradually increased in the 1960s and 70s,... most notably
after the UN General Assembly adopted the monumental Resolution 2758
in 1971

Since then, almost all of the states that had erstwhile recognized the ROC
as the legitimate government of China, terminated their official relations
with... the said government, in favor of establishing diplomatic relations
with the PROC.

Under the Joint Communiqué, the Philippines categorically stated its

adherence to the One China policy of the PROC.

The Philippines' commitment to the One China policy of the PROC,

however, did not preclude the country from keeping unofficial relations
with Taiwan on a "people-to-people" basis.

Maintaining ties with Taiwan that is permissible by... the terms of the
Joint Communiqué, however, necessarily required the Philippines, and
Taiwan, to course any such relations thru offices outside of the official or
governmental organs.

Hence, despite ending their diplomatic ties, the people of Taiwan and of
the Philippines maintained an unofficial relationship facilitated by the
offices of the Taipei Economic and Cultural Office, for the former, and the
MECO, for the latter.

The purposes underlying the incorporation of MECO, as stated in its

articles of... incorporation

To establish and develop the commercial and industrial interests of

Filipino nationals here and abroad, and assist on all measures designed to
promote and maintain the trade relations of the country with the citizens
of other foreign countries;

From the moment it was incorporated, the MECO became the corporate
entity "entrusted" by the Philippine government with the responsibility of
fostering "friendly" and "unofficial" relations with the people of Taiwan,
particularly in the areas of... trade, economic cooperation, investment,
cultural, scientific and educational exchanges.

To enable it to carry out such responsibility, the MECO was "authorized"

by the government to perform certain "consular and other functions"
that... relates to the promotion, protection and facilitation of Philippine
interests in Taiwan.

At present, it is the MECO that oversees the rights and interests of

Overseas Filipino Workers (OFWs) in Taiwan; promotes the Philippines as
a tourist and investment destination for the Taiwanese; and facilitates
the travel of Filipinos and Taiwanese from Taiwan to the

Philippines, and vice versa.

On 23 August 2010, petitioner sent a letter... to the COA requesting for a

"copy of the latest financial and audit report" of the MECO invoking, for
that purpose, his "constitutional right to information on matters of public
concern."

The petitioner made the request on the belief that the MECO, being under
the "operational supervision" of the Department of Trade and Industry
(DTI), is a government owned and controlled corporation (GOCC) and thus
subject to the audit jurisdiction of the

COA

Assistant

Commissioner Naranjo revealed that the MECO was "not among the
agencies audited by any of the three Clusters of the Corporate
Government Sector."

Taking the 25 August 2010 memorandum as an admission that the COA

had never audited and examined the accounts of the MECO, the petitioner
filed the instant petition for mandamus on 8 September 2010. Petitioner
filed the suit in his capacities as

"taxpayer, concerned citizen, a member of the Philippine Bar and law

book author.

Petitioner posits that by failing to audit the accounts of the MECO, the
COA is neglecting its duty under Section 2(1), Article IX-D of the
Constitution to audit the accounts of an otherwise bona fide GOCC or
government instrumentality. It is the adamant claim of the... petitioner
that the MECO is a GOCC without an original charter or, at least, a
government instrumentality, the funds of which partake the nature of
public funds.

According to petitioner, the MECO possesses all the essential

characteristics of a GOCC and an instrumentality under the Executive
Order No. (EO) 292, s. 1987 or the Administrative Code: it is a non-stock
corporation vested with governmental functions relating to public...
needs; it is controlled by the government thru a board of directors
appointed by the President of the Philippines; and while not integrated
within the executive departmental framework, it is nonetheless under the
operational and policy supervision of the
DTI

Issues:

by failing to audit the accounts of the MECO, the COA is neglecting its
duty under Section 2(1), Article IX-D of the Constitution to audit the
accounts of an otherwise bona fide GOCC or government instrumentality

MECO argues that the mandamus petition was prematurely filed.

petition ought to be dismissed on procedural grounds and on the ground

of mootness.

petitioner lacks locus standi to bring the suit.

the instant petition already became moot when COA Chairperson Maria
Gracia M. Pulido-Tan (Pulido-Tan) issued Office Order No. 2011-698... on 6
October 2011.

Chairperson Pulido-Tan already directed a team of auditors to proceed to

Taiwan, specifically for the purpose of auditing the accounts of, among
other government agencies based therein, the MECO.

MECO is a non-governmental... entity.

whether the COA is, under prevailing law, mandated to audit the accounts
of the MECO. Conversely, are the accounts of the MECO subject to the
audit jurisdiction of the COA?

Ruling:

We grant the petition in part. We declare that the MECO is a non-

governmental entity. However, under existing laws, the accounts of the
MECO pertaining to the "verification fees" it collects on behalf of the
DOLE as well as the fees it was authorized... to collect under Section 2(6)
of EO No. 15, s. 2001, are subject to the audit jurisdiction of the COA.
Such fees pertain to the government and should be audited by the COA.

Mootness of Petition

A case is deemed moot and academic when, by reason of the occurrence

of a supervening event, it ceases to present any justiciable controversy.

Since they lack an actual controversy otherwise cognizable by courts,

moot cases are, as a rule,... dismissible.

The rule that requires dismissal of moot cases, however, is not absolute.
It is subject to exceptions.
The "moot and academic" principle is not a magical formula that can
automatically dissuade the courts in resolving a case. Courts will decide
cases, otherwise moot and academic, if: first, there is a grave violation of
the Constitution;... second, the exceptional character of the situation and
the paramount public interest is involved... third, when constitutional
issue raised requires formulation of controlling principles to guide the
bench, the bar, and the... public... and fourth, the case is capable of
repetition yet evading review

In this case, We find that the issuance by the COA of Office Order No.
2011-698 indeed qualifies as a supervening event that effectively renders
moot and academic the main prayer of the instant mandamus petition. A
writ of mandamus to compel the COA... to audit the accounts of the MECO
would certainly be a mere superfluity, when the former had already
obliged itself to do the same.

Be that as it may, this Court refrains from dismissing outright the petition.
We believe that the mandamus petition was able to craft substantial
issues presupposing the commission of a grave violation of the
Constitution and involving... paramount public interest, which need to be
resolved nonetheless:

First. The petition makes a serious allegation that the COA had been
remiss in its constitutional or legal duty to audit and examine the
accounts of an otherwise auditable entity in the MECO.

Second. There is paramount public interest in the resolution of the issue

concerning the failure of the COA to audit the accounts of the MECO. The
propriety or impropriety of such a refusal is determinative of whether the
COA was able to faithfully fulfill its... constitutional role as the guardian of
the public treasury, in which any citizen has an interest.

Third. There is also paramount public interest in the resolution of the

issue regarding the legal status of the MECO; a novelty insofar as our
jurisprudence is concerned. We find that the status of the MECO whether
it may be considered as a government agency or not... has a direct
bearing on the country's commitment to the One China policy of the
PROC.

An allegation as serious as a violation of a constitutional or legal duty,

coupled with the pressing public interest in the resolution of all related
issues, prompts this Court to pursue a definitive ruling thereon, if not for
the proper guidance of the government or agency... concerned, then for
the formulation of controlling principles for the education of the bench,
bar and the public in general.
For this purpose, the Court invokes its symbolic function

Thus, the inclusion of the MECO in Office Order No. 2011-698 appears to
be entirely dependent upon the judgment of the incumbent chairperson of
the COA; susceptible of being undone, with or without reason, by her or
even her successor. Hence, the case now before this

Court is dangerously capable of being repeated yet evading review.

We sustain petitioner's standing, as a concerned citizen, to file the

instant petition.

The rules regarding legal standing in bringing public suits, or locus standi,
are already well-defined in our case law. Again, We cite David, which
summarizes jurisprudence on this point:

By way of summary, the following rules may be culled from the cases
decided by this Court. Taxpayers, voters, concerned citizens, and
legislators may be accorded standing to sue, provided that the following
requirements are met:

(1) the cases involve constitutional issues;

(2) for taxpayers, there must be a claim of illegal disbursement of public

funds or that the tax measure is unconstitutional;

(3) for voters, there must be a showing of obvious interest in the validity
of the election law in question;

(4) for concerned citizens, there must be a showing that the issues raised
are of transcendental importance which must be settled early; and

(5) for legislators, there must be a claim that the official action
complained of infringes upon their prerogatives as legislators.

We rule that the instant petition raises issues of transcendental

importance, involved as they are with the performance of a constitutional
duty, allegedly neglected, by the COA. Hence, We hold that the petitioner,
as a concerned citizen, has the requisite... legal standing to file the
instant mandamus petition.

To be sure, petitioner does not need to make any prior demand on the
MECO or the COA in order to maintain the instant petition. The duty of the
COA sought to be compelled by mandamus, emanates from the
Constitution and law, which explicitly require, or

"demand," that it perform the said duty. To the mind of this Court,
petitioner already established his cause of action against the COA when
he alleged that the COA had neglected its duty in violation of the
Constitution and the law.

In view of the transcendental importance of the issues raised in the

mandamus petition, as earlier mentioned, this Court waives this last
procedural issue in favor of a resolution on the merits.

Under Section 2(1) of Article IX-D of the Constitution,... he COA was

vested with the "power, authority and duty" to "examine, audit and settle"
the "accounts" of the following entities:

The government, or any of its subdivisions, agencies and

instrumentalities;

GOCCs with original charters;

GOCCs without original charters;

Constitutional bodies, commissions and offices that have been granted

fiscal autonomy under the Constitution; and

Non-governmental entities receiving subsidy or equity, directly or

indirectly, from or through the government, which are required by law or
the granting institution to submit to the COA for audit as a condition of
subsidy or equity.

The term "accounts" mentioned in the subject constitutional provision

pertains to the "revenue," "receipts," "expenditures" and "uses of funds
and property" of the foregoing entities.

Complementing the constitutional power of the COA to audit accounts of

"non-governmental entities receiving subsidy or equity xxx from or
through the government" is Section 29(1)... of the Audit Code, which
grants the COA visitorial authority... over the following non-governmental
entities:

Non-governmental entities "required to pay levy or government share";

Both petitioner and the COA claim that the accounts of the MECO are
within the audit jurisdiction of the COA, but vary on the extent of the
audit and on what type of auditable entity the MECO is.

The MECO Is Not a GOCC or

Government Instrumentality

Government instrumentalities are agencies of the national government

that, by reason of some "special function or jurisdiction" they perform or
exercise, are allotted "operational autonomy" and are "not integrated
within the department... framework."[88] Subsumed under the rubric
"government instrumentality" are the following entities:[89]... regulatory
agencies,... chartered institutions,... government corporate entities or
government instrumentalities with corporate powers (GCE/GICP),[90] and

GOCCs

Government-Owned or -Controlled Corporation (GOCC) refers to any

agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government of the Republic of the

Philippines directly or through its instrumentalities either wholly or,

where applicable as in the case of stock corporations, to the extent of at
least a majority of its outstanding capital stock

GOCCs, therefore, are "stock or non-stock" corporations "vested with

functions relating to public needs" that are "owned by the Government
directly or through its instrumentalities."

By definition, three attributes thus... make an entity a GOCC: first, its

organization as stock or non-stock corporation;... second, the public
character of its function; and third, government ownership over the same.

Possession of all three attributes is necessary to deem an entity a GOCC.

In this case, there is not much dispute that the MECO possesses the first
and second attributes. It is the third attribute, which the MECO lacks.

The public character of the functions vested in the MECO cannot be

doubted either. Indeed, to a certain degree, the functions of the MECO
can even be said to partake of the nature of governmental functions. As
earlier intimated, it is the MECO that, on behalf of the... people of the
Philippines, currently facilitates unofficial relations with the people in
Taiwan.

Consistent with its corporate purposes, the MECO was "authorized" by

the Philippine government to perform certain "consular and other
functions" relating to the promotion, protection and facilitation of
Philippine interests in Taiwan.

The government owns a stock or non-stock corporation if it has

controlling interest in the corporation. In a stock corporation, the
controlling interest of the government is assured by its ownership of at
least fifty-one percent (51%) of the corporate capital... stock.
In a non-stock corporation, like the MECO, jurisprudence teaches that the
controlling interest of the government is affirmed when "at least majority
of the members are government officials holding such membership by
appointment or... designation"... or there is otherwise "substantial
participation of the government in the selection" of the corporation's
governing board.

The MECO, however, counters that the "desire letters" that the President
transmits are merely recommendatory and not binding on it.

The MECO maintains that, as a corporation organized under the

Corporation Code, matters relating to the... election of its directors and
officers, as well as its membership, are ultimately governed by the
appropriate provisions of the said code, its articles of incorporation and
its by-laws.

We find the contention of the MECO to be the one more consistent with
the law.

The fact of the incorporation of the MECO under the Corporation Code is
key. The MECO was correct in postulating that, as a corporation
organized under the Corporation Code, it is governed by the appropriate
provisions of the said code, its articles of incorporation and its... by-laws.
In this case, it is the by-laws... of the MECO that stipulates that its
directors are elected by its members; its officers are elected by its
directors; and its members, other than the original incorporators, are
admitted by way of a... unanimous board resolution,... The MECO Is Not a
Government Instrumentality; It Is a Sui Generis Entity.

from hindsight, it is clear that the MECO is uniquely situated as compared

with other private corporations. From its over-reaching corporate
objectives, its special duty and authority to exercise certain consular
functions, up to the oversight by the executive... department over its
operations all the while maintaining its legal status as a non-
governmental entity the MECO is, for all intents and purposes, sui generis.

Certain Accounts of the MECO May

Be Audited By the COA.

We agree that the accounts of the MECO pertaining to its collection of

"verification fees" is subject to the audit jurisdiction of the COA.
However, We digress from the view that such accounts are the only ones
that ought to be audited by the COA. Upon careful... evaluation of the
information made available by the records vis-à-vis the spirit and the
letter of the laws and executive issuances applicable, We find that the
accounts of the MECO pertaining to the fees it was authorized to collect
under Section 2(6) of EO No.

15, s. 2001, are likewise subject to the audit jurisdiction of the COA.

Evidently, the entire "verification fees" being collected by the MECO are
receivables of the DOLE.

The Accounts of the MECO Pertaining to the Verification Fees and

Consular Fees May Be Audited by the COA.

The MECO is not a GOCC or government instrumentality. It is a sui generis

private entity especially entrusted by the government with the facilitation
of unofficial relations with the people in Taiwan without jeopardizing the
country's faithful commitment to the

One China policy of the PROC. However, despite its non-governmental

character, the MECO handles government funds in the form of the
"verification fees" it collects on behalf of the DOLE and the "consular
fees" it collects under Section 2(6) of EO No.

15, s. 2001. Hence, under existing laws, the accounts of the MECO
pertaining to its collection of such "verification fees" and "consular fees"
should be audited by the COA.

Principles:

One China policy

The Philippine Government recognizes the Government of the People's

Republic of China as the sole legal government of China, fully
understands and respects the position of the Chinese Government that
there is but one China and that Taiwan is an... integral part of Chinese
territory, and decides to remove all its official representations from
Taiwan within one month from the date of signature of this communiqué.

this Court refrains from dismissing outright the petition. We believe that
the mandamus petition was able to craft substantial issues presupposing
the commission of a grave violation of the Constitution and involving...
paramount public interest, which need to be resolved nonetheless:

First. The petition makes a serious allegation that the COA had been
remiss in its constitutional or legal duty to audit and examine the
accounts of an otherwise auditable entity in the MECO.

Second. There is paramount public interest in the resolution of the issue

concerning the failure of the COA to audit the accounts of the MECO. The
propriety or impropriety of such a refusal is determinative of whether the
COA was able to faithfully fulfill its... constitutional role as the guardian of
the public treasury, in which any citizen has an interest.

Third. There is also paramount public interest in the resolution of the

issue regarding the legal status of the MECO; a novelty insofar as our
jurisprudence is concerned. We find that the status of the MECO whether
it may be considered as a government agency or not... has a direct
bearing on the country's commitment to the One China policy of the
PROC.

Government-Owned or -Controlled Corporation (GOCC) refers to any

agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government of the Republic of the

Philippines directly or through its instrumentalities either wholly or,

where applicable as in the case of stock corporations, to the extent of at
least a majority of its outstanding capital stock

By definition, three attributes thus... make an entity a GOCC: first, its

organization as stock or non-stock corporation;[94] second, the public
character of its function; and third, government ownership over the same.

The government owns a stock or non-stock corporation if it has

controlling interest in the corporation. In a stock corporation, the
controlling interest of the government is assured by its ownership of at
least fifty-one percent (51%) of the corporate capital... stock.

In a non-stock corporation, like the MECO, jurisprudence teaches that the

controlling interest of the government is affirmed when "at least majority
of the members are government officials holding such membership by
appointment or... designation"... or there is otherwise "substantial
participation of the government in the selection" of the corporation's
governing board.

Case No. 6

REPUBLIC v. CITY OF PARAÑAQUE, GR No. 191109, 2012-07-18

Facts:

The Public Estates Authority (PEA) is a government corporation created

by virtue of Presidential Decree (P.D.) No. 1084 (Creating the Public
Estates Authority, Defining its Powers and Functions, Providing Funds
Therefor and For Other Purposes) which took... effect on February 4, 1977
to provide a coordinated, economical and efficient reclamation of lands,
and the administration and operation of lands belonging to, managed
and/or operated by, the government with the object of maximizing their
utilization and hastening their... development consistent with public
interest.

On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued
by then President Ferdinand Marcos, PEA was designated as the agency
primarily responsible for integrating, directing and coordinating all
reclamation projects for and on behalf of the National

Government.

On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O.

No. 380 transforming PEA into PRA, which shall perform all the powers
and functions of the PEA relating to reclamation activities.

By virtue of its mandate, PRA reclaimed several portions of the foreshore

and offshore areas of Manila Bay, including those located in Parañaque
City, and was issued Original Certificates of Title (OCT Nos. 180, 202,
206, 207, 289, 557, and 559) and Transfer Certificates of

Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the
reclaimed lands.

On February 19, 2003, then Parañaque City Treasurer Liberato M. Carabeo

(Carabeo) issued Warrants of Levy on PRA's reclaimed properties (Central
Business Park and Barangay San Dionisio) located in Parañaque City
based on the assessment for delinquent real property... taxes made by
then Parañaque City Assessor Soledad Medina Cue for tax years 2001 and
2002.

On January 8, 2010, the RTC rendered its decision dismissing PRA's

petition. In ruling that PRA was not exempt from payment of real property
taxes, the RTC reasoned out that it was a GOCC under Section 3 of P.D.
No. 1084. It was organized as a stock corporation because it had an...
authorized capital stock divided into no par value shares. In fact, PRA
admitted its corporate personality and that said properties were
registered in its name as shown by the certificates of title. Therefore, as
a GOCC, local tax exemption is withdrawn by virtue of Section 193... of
Republic Act (R.A.) No. 7160 [Local Government Code (LGC)] which was
the prevailing law in 2001 and 2002 with respect to real property
taxation. The RTC also ruled that the tax exemption claimed by PRA
under E.O. No. 654 had already been expressly repealed by R.A. No.
7160 and that PRA failed to comply with the procedural requirements in
Section 206 thereof.

PRA asserts that it is not a GOCC under Section 2(13) of the Introductory
Provisions of the Administrative Code. Neither is it a GOCC under Section
16, Article XII of the 1987 Constitution because it is not required to meet
the test of economic viability. Instead, PRA is a... government
instrumentality vested with corporate powers and performing an essential
public service pursuant to Section 2(10) of the Introductory Provisions of
the Administrative Code. Although it has a capital stock divided into
shares, it is not authorized to distribute... dividends and allotment of
surplus and profits to its stockholders. Therefore, it may not be classified
as a stock corporation because it lacks the second requisite of a stock
corporation which is the distribution of dividends and allotment of surplus
and profits to the... stockholders.

It insists that it may not be classified as a non-stock corporation because

it has no members and it is not organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like... trade, industry,
agriculture and like chambers as provided in Section 88 of the
Corporation Code.

Moreover, PRA points out that it was not created to compete in the
market place as there was no competing reclamation company operated
by the private sector. Also, while PRA is vested with corporate powers
under P.D. No. 1084, such circumstance does not make it a corporation
but... merely an incorporated instrumentality and that the mere fact that
an incorporated instrumentality of the National Government holds title to
real property does not make said instrumentality a GOCC. Section 48,
Chapter 12, Book I of the Administrative Code of 1987 recognizes a...
scenario where a piece of land owned by the Republic is titled in the
name of a department, agency or instrumentality.

Thus, PRA insists that, as an incorporated instrumentality of the National

Government, it is exempt from payment of real property tax except when
the beneficial use of the real property is granted to a taxable person. PRA
claims that based on Section 133(o) of the LGC, local... governments
cannot tax the national government which delegate to local governments
the power to tax.

It explains that reclaimed lands are part of the public domain, owned by
the State, thus, exempt from the payment of real estate taxes. Reclaimed
lands retain their inherent potential as areas for public use or public
service. While the subject reclaimed lands are still in its... hands, these
lands remain public lands and form part of the public domain. Hence, the
assessment of real property taxes made on said lands, as well as the levy
thereon, and the public sale thereof on April 7, 2003, including the
issuance of the certificates of sale in favor of... the respondent Parañaque
City, are invalid and of no force and effect.

Issues:
Whether the Trial Court erred when it failed to consider that reclaimed lands are
part of the public domain.

THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT

RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE,
EXEMPT FROM REAL PROPERTY TAX.

Ruling:

The Court finds merit in the petition.

In the case at bench, PRA is not a GOCC because it is neither a stock nor
a non-stock corporation. It cannot be considered as a stock corporation
because although it has a capital stock divided into no par value shares
as provided in Section 7... of P.D.

No. 1084, it is not authorized to distribute dividends, surplus allotments or

profits to stockholders. There is no provision whatsoever in P.D. No. 1084
or in any of the subsequent executive issuances pertaining to PRA,
particularly, E.O. No. 525,... E.O.

No. 654... and EO No. 798... that authorizes PRA to distribute dividends,
surplus allotments or profits to its stockholders.

PRA cannot be considered a non-stock corporation either because it does

not have members. A non-stock corporation must have members.

Moreover, it was not organized for any of the purposes mentioned in

Section 88 of the Corporation Code. Specifically, it... was created to
manage all government reclamation projects.

Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of

the Administrative Code of 1987, thus:

SEC 14. Power to Reserve Lands of the Public and Private Dominion of the
Government.-

(1) The President shall have the power to reserve for settlement or public
use, and for specific public purposes, any of the 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 public... purpose
indicated until otherwise provided by law or proclamation.

Reclaimed lands such as the subject lands in issue are reserved lands for
public use. They are properties of public dominion. The ownership of such
lands remains with the State unless they are withdrawn by law or
presidential proclamation from public use.

Under Section 2, Article XII of the 1987 Constitution, the foreshore and
submerged areas of Manila Bay are part of the "lands of the public
domain, waters x x x and other natural resources" and consequently
"owned by the State." As such, foreshore and submerged areas

"shall not be alienated," unless they are classified as "agricultural lands"

of the public domain. The mere reclamation of these areas by PEA does
not convert these inalienable natural resources of the State into alienable
or disposable lands of the public domain. There must be... a law or
presidential proclamation officially classifying these reclaimed lands as
alienable or disposable and open to disposition or concession. Moreover,
these reclaimed lands cannot be classified as alienable or disposable if
the law has reserved them for some public or... quasi-public use.

As the Court has repeatedly ruled, properties of public dominion are not
subject to execution or foreclosure sale.

Thus, the assessment, levy and foreclosure made on the subject

reclaimed lands by respondent, as well as the issuances of certificates
of... title in favor of respondent, are without basis.

Principles:

Two requisites must concur before one may be classified as a stock

corporation, namely: (1) that it has capital stock divided into shares; and
(2) that it is authorized to distribute dividends and allotments of surplus
and profits to its stockholders. If only one... requisite is present, it cannot
be properly classified as a stock corporation. As for non-stock
corporations, they must have members and must not distribute any part
of their income to said members.

Case no. 7

CASE DIGEST: BOY SCOUTS OF THE PHILIPPINES v. COMMISSION

ON AUDIT. G.R. No.177131; June 7, 2011.

FACTS: This case arose when the COA issued Resolution No. 99-011on August
19, 1999 ("the COA Resolution"), with the subject "Defining the Commissions
policy with respect to the audit of the Boy Scouts of the Philippines." In its
whereas clauses, the COA Resolution stated that the BSP was created as a public
corporation under Commonwealth Act No. 111, as amended by Presidential
Decree No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines
v. National Labor Relations Commission, the Supreme Court ruled that the BSP,
as constituted under its charter, was a "government-controlled corporation
within the meaning of Article IX(B)(2)(1) of the Constitution"; and that "the BSP
is appropriately regarded as a government instrumentality under the 1987
Administrative Code." The COA Resolution also cited its constitutional mandate
under Section 2(1), Article IX (D).Finally, the COA Resolution reads:

NOW THEREFORE, in consideration of the foregoing premises, the

COMMISSION PROPER HAS RESOLVED, AS IT DOES HEREBY RESOLVE,to
conduct an annual financial audit of the Boy Scouts of the Philippines in
accordance with generally accepted auditing standards, and express an opinion
on whether the financial statements which include the Balance Sheet, the Income
Statement and the Statement of Cash Flows present fairly its financial position
and results of operations.

xxxx

BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision,the

Boy Scouts of the Philippines shall be classified among the government
corporations belonging to the Educational, Social, Scientific, Civic and Research
Sectorunder the Corporate Audit Office I, to be audited, similar to the subsidiary
corporations, by employing the team audit approach
ISSUE: Does COA have jurisdiction over BSP?

HELD: After looking at the legislative history of its amended charter and

carefully studying the applicable laws and the arguments of both parties, [the
Supreme Court found] that the BSP is a public corporation and its funds are
subject to the COA's audit jurisdiction.

The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936),
entitled "An Act to Create a Public Corporation to be Known as the Boy Scouts of
the Philippines, and to Define its Powers and Purposes" created the BSP as a
"public corporation"

There are three classes of juridical persons under Article 44 of the Civil Code and
the BSP, as presently constituted under Republic Act No. 7278,falls under the
second classification.Article 44 reads:
Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2)Other corporations,institutions and entities for public interest or purpose
created by law; their personality begins as soon as they have been constituted
according to law;
(3) Corporations, partnerships and associations forprivate interest or purposeto
which the law grants a juridical personality, separate and distinct from that of
each shareholder, partner or member.

The BSP, which is a corporation created for a public interest or purpose, is

subject to the law creating it under Article 45 of the Civil Code, which provides:

Art. 45.Juridical persons mentioned in Nos. 1 and 2 of the preceding article are
governed by the laws creating or recognizing them.

Private corporations are regulated by laws of general application on the subject.

Partnerships and associations for private interest or purpose are governed by the
provisions of this Code concerning partnerships.

The purpose of the BSP as stated in its amended charter shows that it was created
in order to implement a State policy declared in Article II, Section 13 of the
Constitution, which reads:

Section 13. The State recognizes the vital role of the youth in nation-building and
shall promote and protect their physical, moral, spiritual, intellectual, and social
well-being. It shall inculcate in the youth patriotism and nationalism, and
encourage their involvement in public and civic affairs.

Evidently, the BSP, which was created by a special law to serve a public purpose
in pursuit of a constitutional mandate, comes within the class of "public
corporations" defined by paragraph 2, Article 44 of the Civil Code and governed
by the law which creates it, pursuant to Article 45 of the same Code. DENIED.

Case No. 8

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY v. CENTRAL BOARD

OF ASSESSMENT APPEALS, GR No. 178030, 2010-12-15

Facts:
Lucena Fishing Port Complex (LFPC) is one of the fishery infrastructure
projects undertaken by the National Government under the Nationwide
Fish Port-Package.

Located at Barangay Dalahican, Lucena City, the fish port was

constructed on a... reclaimed land with an area of 8.7 hectares more or
less

The Philippine Fisheries Development Authority (PFDA) was created by

virtue of P.D. 977 as amended by E.O. 772, with functions and powers to
(m)anage, operate, and develop the Navotas Fishing Port Complex and
such other fishing port complexes that may be established by the

Authority. Pursuant thereto, Petitioner-Appellant PFDA took over the

management and operation of LFPC in February 1992.

On October 26, 1999, in a letter addressed to PFDA, the City Government

of Lucena demanded payment of realty taxes on the LFPC property for the
period from 1993 to 1999 in the total amount of P39,397,880.00.

On October 17, 2000 another demand letter was sent by the Government
of Lucena City on the same LFPC property, this time in the amount of
P45,660,080.00 covering the period from 1993 to 2000.

On December 18, 2000 Petitioner-Appellant filed its Appeal before the

Local Board of Assessment Appeals of Lucena City, which was dismissed
for lack of merit. On November 6, 2001 Petitioner-Appellant filed its
motion for reconsideration; this was denied by the Appellee Local

Board on December 10, 2001.

PFDA appealed to the CBAA. In its Decision dated 5 October 2005, the
CBAA dismissed the appeal for lack of merit.

The ownership of LFPC as passed on by the Republic of the Philippines to

PFDA is bourne by Direct evidence: P.D. 977, as amended (supra).
Therefore, Petitioner-Appellant's claim for realty tax exemption on LFPC
is untenable.

On appeal, the Court of Tax Appeals denied PFDA's petition for review and
affirmed the 5 October 2005 Decision of the CBAA.

The Court of Tax Appeals held that PFDA is a government-owned or

controlled corporation, and is therefore subject to the real property tax
imposed by local government units pursuant to Section 232 in relation to
Sections 193 and 234 of the Local Government Code.

Issues:
whether PFDA is liable for the real property tax assessed on the Lucena
Fishing Port Complex.

Ruling:

The petition is meritorious.

The ruling of the Court of Tax Appeals is anchored on the wrong premise
that the PFDA is a government-owned or controlled corporation. On the
contrary, this Court has already ruled that the PFDA is a government
instrumentality and not a government-owned or controlled... corporation.

In the 2007 case of Philippine Fisheries Development Authority v. Court of

Appeals,6 the Court resolved the issue of whether the PFDA is a
government-owned or controlled corporation or an instrumentality of the
national government.

The Court rules that the Authority [PFDA] is not a GOCC but an
instrumentality of the national government which is generally exempt
from payment of real property tax. However, said exemption does not
apply to the portions of the IFPC which the Authority leased to... private
entities. With respect to these properties, the Authority is liable to pay
property tax. Nonetheless, the IFPC, being a property of public dominion
cannot be sold at public auction to satisfy the tax delinquency.

Under Section 133(o)[10] of the Local Government Code, local

government units have no... power to tax instrumentalities of the national
government like the PFDA. Thus, PFDA is not liable to pay real property
tax assessed by the Office of the City Treasurer of Lucena City on the
Lucena Fishing Port Complex, except those portions which are leased to
private persons or... entities.

Besides, the Lucena Fishing Port Complex is a property of public

dominion intended for public use, and is therefore exempt from real
property tax under Section 234(a)[11] of the Local Government Code.
Properties of public dominion are owned by the State or... the Republic of
the Philippines.

Article 420 of the Civil Code provides:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads,
and others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.