G.R. No.
117577 December 1, 1995
ALEJANDRO B. TY AND MVR PICTURE TUBE, INC., petitioners,
vs.
THE HON. AURELIO C. TRAMPE, in his capacity as Judge of the Regional Trial
Court of Pasig, Metro Manila, THE HON. SECRETARY OF FINANCE, THE
MUNICIPAL ASSESSOR OF PASIG AND THE MUNICIPAL TREASURER OF
PASIG, respondents.
PANGANIBAN, J.:
ARE THE INCREASED REAL ESTATE TAXES imposed by and being collected in the
Municipality (now City) of Pasig, effective from the year 1994, valid an legal? This is the
question brought before this Court for resolution.
The Parties
Petitioner Alejandro B. Ty is a resident of and registered owner of lands and buildings in the
Municipality (now City) of Pasig, while petitioner MVR Picture Tube, Inc. is a corporation
duly organized and existing under Philippine laws and is likewise a registered owner of lands
and buildings in said Municipality1 .
Respondent Aurelio C. Trampe is being sued in his capacity as presiding judge of Branch 163.
Regional Trial Court of the National Capital Judicial Region, sitting in Pasig, whose Decision
dated 14 July 1994 and Order dated 30 September 1994 in Special Civil Action No. 629
(entitled "Alejandro B. Ty and MVR Picture Tube, Inc. vs. The Hon. Secretary of Finance. et
al.") are sought to be set aside. Respondent Secretary of Finance is impleaded as the
government officer who approved the Schedule of Market Values used as basis for the new tax
assessments being enforced by respondents Municipal Assessor and Municipal Treasurer of
Pasig and the legality of which is being questioned in this petition2 .
The Antecedent Facts
On 06 January 1994, respondent Assessor sent a notice of assessment respecting certain real
properties of petitioners located in Pasig, Metro Manila. In a letter dated 18 March 1994,
petitioners through counsel "request(ed) the Municipal Assessor to reconsider the subject
assessments"3 .
Not satisfied, petitioners on 29 March 1994 filed with the Regional Trial Court of the National
Capital Judicial Region, Branch 163, presided over by respondent Judge, a Petition for
Prohibition with prayer for a restraining order and/or writ of preliminary injunction to declare
null and void the new tax assessments and to enjoin the collection of real estate taxes based on
said assessments. In a Decision4 dated 14 July 1994, respondent Judge denied the petition "for
lack of merit" in the following disposition.
WHEREFORE, foregoing premises considered, petitioners' prayer to
declare unconstitutional the schedule of market values as prepared by the
Municipal Assessor of Pasig, Metro Manila, and to enjoin permanently the
Municipal Treasurer of Pasig, Metro Manila, from collecting the real
property taxes based thereof (sic) is hereby DENIED for lack of merit.
Cost (sic) de oficio.
Subsequently, petitioners' Motion for Reconsideration was also denied by respondent Judge in
an Order 5 dated 30 September 1994.
Rebuffed by said Decision and Order, petitioners filed this present Petition for Review directly
before this Court, raising pure questions of law and assigning the following errors:
The Court a quo gravely erred in holding that Presidential Decree No. 921
was expressly repealed by R.A. 7160 and that said presidential decree
including its Implementing Rules (P.D. 464) went down to the statutes'
graveyard together with the other decision(s) of the Supreme Court
affecting the same.
The Court a quo while holding that the new tax assessments have
tremendously increased ranging from 418.8% to 570%, gravely erred in
blaming petitioners for their failure to exhaust administrative remedies
provided for by law.
The Court a quo blatantly erred in not declaring the confiscatory and
oppressive nature of the assessments as illegal. void ab initio and
unconstitutional constituting a deprivation of property without due process
of law.6
In a resolution dated 21 November 1994, this Court, without giving due course to the petition,
required respondents to comment thereon. Respondents Municipal Treasurer and Municipal
Assessor, through counsel, filed their Comment on 19 December 1994, and respondent
Secretary of Finance, through the Solicitor General, submitted his on 11 May 1995. Petitioners
filed their Reply to the Comment of respondent Assessor and Treasurer 06 January 1995, and
their Reply to that of the respondent Secretary on 18 May 1995. After careful deliberation on
the above pleadings, the Court resolved to give due course to the petition, and, inasmuch as the
issues are relatively simple, the Court dispensed with requiring the parties to submit further
memoranda and instead decided to consider the respondents' respective Comments as their
answers and memoranda. Thus the case is now considered submitted for resolution.
The Issues
The issues brought by the parties for decision by this Court are:
1
 1. Whether Republic Act No. 7160, otherwise known as the Local
Government Code of 1991, repealed the provisions of Presidential Decree
No. 921;
2. Whether petitioners are required to exhaust administrative remedies
prior to seeking judicial relief; and
3. Whether the new tax assessments are oppressive and confiscatory, and
therefore unconstitutional.
In disposing of the above issues against petitioners, the court a quo ruled that the schedule of
market values and the assessments based thereon prepared solely by respondent assessor are
valid and legal, they having been prepared in accordance with the provisions of the Local
Government Code of 1991 (R.A. 7160). It held also that said Code had effectively repealed the
previous law on the matter, P.D. 921, which required, in the preparation of said schedule, joint
action by all the city and municipal assessors in the Metropolitan Manila area. The lower court
also faulted petitioners with failure to exhaust administrative remedies provided under
Sections 226 and 252 of R.A. 7160. Finally, it found the questioned assessments consistent
with the "tremendously increased . . . price of real estate anywhere in the country."7
Stated the court:
This Court is inclined to agree with the view of defendants that R.A. 7160
in its repealing clause provide (sic) that Presidential Decree Nos. . . .
464 . . . are hereby repealed and rendered of no force and effect. Hence
said presidential decrees including their implementing rules went down to
the statutes' graveyard together with the decisions of the Supreme Court on
cases effecting (sic) the same.
This Court is also in accord with respondents (sic) view that petitioners
failed to avail of either Section 226 of R.A. 7160, that is by appealing the
assessment of their properties to the Board of Assessment Appeal within
sixty 160) days from the date of receipt of the written Notice of
Assessment, and if it is true that petitioner (sic) as alleged in their
pleadings was not afforded the opportunity to appeal to the board of
assessment appeal, then they could have availed of the provisions of
Section 252, of the same R.A. 7160 by paying the real estate tax under
protest. Because of petitioners (sic) failure to avail of either Sections 226
or 252 of R.A. 7160, they failed to exhaust administratives (sic) remedies
provided for by law before bringing the case to Court. (Buayan Cattle Co.,
Inc. vs. Quintillan, 128 SCRA 276). Therefore the filing of this case
before this Court is premature, the same not falling under the exception
because the issue involved is not a question of law but of fact (Valmonte
vs. Belmonte, Jr., 170 SCRA 256).
Petitioners also alleged that the New Tax Assessments are not only
oppressive and confiscatory but also destructive in view of the tremendous
increase in its valuation, from P855,360.00 to P4,121,280.00 a marked
increase of 418.8% of one of its properties, while the other, from
P857,600.00 to P4,374,410.00, an increased (sic) of 510%. This Court
agree (sic) with petitioners (sic) observation, but the reality (sic) the price
of real property anywhere in the country tremendously increased. This is
shown in the Real Estate Monitor of Economic Incorporated (copy
attached with the memorandum of respondents). For example real
properties in Pasig in 1991 located at the Ortigas Commercial Complex
command (sic) a price of P42,000.00 per square meter which price is
supported by a case filed before this Court (civil case no. 64506, Jesus
Fajardo, et al. vs. Ortigas and Co.) for Recovery (sic) of agents (sic)
commission. The property subject of the sale which was also located at the
Ortigas Commercial Complex at Pasig, Metro Manila was sold to a
Taiwanese at P42,000.00 per square meter. It is therefore not surprising
that the assessment of real properties in Pasig has increased tremendously.
Had petitioners first exhausted administrative remedies they would have
realized the fact that prices of real estate has (sic) tremendously increased
and would have known the reason/reasons why.8
In its Order dated 30 September 1994 denying the Motion for Reconsideration, the court a quo
ruled:
This Court despite petitioners' exhaustive and thorough research and
discussion of the point in issue, is still inclined to sustain the view that
P.D. 921 was impliedly repealed by R.A. 7160. P.D. 921 to the mind of
this Court is an implementing law of P.D. 464, Sections 3, 6, 9, 12 and 13
of said P.D. provide how certain provisions of P.D. 464 shall be
implemented. Since P.D. 464 was expressly repealed by R.A. 7160. P.D.
921 must necessarily be considered repealed, otherwise, what should
Sections 3, 6, 9, 12 and 13 of P.D. 921 implement? And, had the law
makers intended to have said P.D. 921 remain valid and enforceable they
would have provided so in R.A. 7160. Since there is none, P.D. 921 must
be considered repealed.9
Re: The First Issue:
Repeal of P.D. 921?
To resolve the first issue, it is necessary to revisit the following provisions of law:
1. Section 15 of P.D. No. 464, promulgated on 20 May 1974, otherwise known as the Peal
Property Tax Code:
Sec. 15. Preparation of Schedule of Values. — Before any general
revision of property assessments is made, as provided in this Code, there
shall be prepared for the province or city a Schedule of Market Value for
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 the different classes of real property therein situated in such form and
detail as shall be prescribed by the Secretary of Finance.
Said schedule, together with an abstract of the data (on) which it is based,
shall be submitted to the Secretary of Finance for review not later than the
thirty-first day of December immediately preceding the calendar year the
general revision of assessments shall be undertaken. The Secretary of
Finance shall have ninety days from the date of receipt within which to
review said schedule to determine whether it conforms with the provisions
of this Code.
2. Subsequently, on 12 April 1976, P.D. 921 was promulgated, which in Section 9 thereof,
states:
Sec. 9. Preparation of Schedule of Values for Real Property within the
Metropolitan Area. — The Schedule of Values that will serve as the basis
for the appraisal and assessment for taxation purposes of real properties
located within the Metropolitan Area shall be prepared jointly by the City
Assessors of the Districts created under Section one hereof, with the City
Assessor of Manila acting as Chairman, in accordance with the pertinent
provisions of Presidential Decree No. 464, as amended, otherwise known
as the Real Property Tax Code, and the implementing rules and
regulations thereof issued by the Secretary of Finance.
3. Section One of P.D. 921, referred to above, provides:
Sec. 1. Division of Metropolitan Manila into Local Treasury and
Assessment Districts. — For purposes of effective fiscal management,
Metropolitan Manila is hereby divided into the following Local Treasury
and Assessment Districts:
First District — Manila
Second District — Quezon City, Pasig, Marikina,
Mandaluyong and San Juan
Third District — Caloocan City, Malabon,
Navotas and Valenzuela
Fourth District — Pasay City, Makati, Paranaque,
Muntinlupa, Las Piñas, Pateros and
Taguig
Manila, Quezon City, Caloocan City and Pasay City shall be the respective
Centers of the aforesaid Treasury and Assessment Districts.
4. On 01 January 1992, Republic Act No. 7160, otherwise known as the Local Government
Code of 1991, took effect. Section 212 of said law is quoted as follows:
Sec. 212. Preparation of Schedule of Fair Market Values. — Before any
general revision of property assessment is made pursuant to the provisions
of this Title, there shall be prepared a schedule of fair market values by the
provincial, city and the municipal assessors of the municipalities within
the Metropolitan Manila Area for the different classes of real property
situated in their respective local government units for enactment by
ordinance of the sanggunian concerned. The schedule of fair market values
shall be published in a newspaper of general circulation in the province,
city or municipality concerned, or in the absence thereof, shall be posted
in the provincial capitol, city or municipal hall and in two other
conspicuous public place therein.
5. The repealing clause of R.A. 7160 found in the Section 534 thereof is hereby reproduced as
follows:
Sec. 534. Repealing Clause. —
(a) . . .
(b) . . .
(c) . . . ; and Presidential Decree Nos. 381, 436, 464, 477, 626, 632, 752,
and 1136 are hereby repealed and rendered of no force and effect.
xxx xxx xxx
(f) All general and special laws, acts, city charter, decrees, executive
orders, proclamations and administrative regulations, or part or parts
thereof which are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly. (emphasis supplied)
It is obvious from the above provisions of R.A 7160, specifically Sec. 534, that P.D. 921 was
NOT EXPRESSLY repealed by said statute. Thus, the question is: Was P.D. 921 IMPLIEDLY
repealed by R.A. 7160?
Petitioners contend that, contrary to the aforequoted Decision of the lower court, "whether the
assessment is made before or after the effectivity of R.A. 7160, the observance of, and
compliance with, the explicit requirement of P.D. 921 is strict and mandatory either" because
P.D. 921 was not impliedly repealed by R.A. 7160 and is therefore still the applicable statute,
or because the Supreme Court, in three related cases 10 promulgated on 16 December 1993 —
after the Local Government Code of 1991 already took effect — ruled that a schedule of
market values and the corresponding assessments based thereon "prepared solely by the city
assessor . . . failed to comply with the explicit requirement (of collegial and joint action by all
3
the assessors in the Metropolitan Manila area under P.D. 921) . . . and are on that account
illegal and void."
On the other hand, respondents aver that Section 9 of P.D. 921 and Section 212 of R.A. 7160
are clearly and unequivocally incompatible because they dwell on the same subject matter,
namely, the preparation of a schedule of values for real property within the Metropolitan
Manila Area. Under P.D. 921, the schedule shall be prepared jointly by the city assessors of
the District, while, under R.A. 7160, such schedule shall be prepared "by the provincial, city
and municipal assessors of the municipalities within the Metropolitan Manila area . . . ".
Furthermore, they claim that "Section 9 (of P.D. 921) merely supplement(ed) Section 15 of
P.D. 464 in so far as the preparation of the schedule of values in Metro Manila (is concerned)."
Thus, "with the express repeal of P.D. 464 . . . P.D. 921 . . .can not therefore exist
independently on its own." They also argue that although the aforecited Supreme Court
decision was promulgated after R.A. 7160 took effect, "the assessment of the Municipal
Assessors in those three (3) cited cases were assessed in 1990 prior to the effectivity of the
Code." Hence, the doctrine in said cases cannot be applied to those prepared in 1994 under
R.A. 7160.
We rule for petitioners.
R.A. 7160 has a repealing provision (Section 534) and, if the intention of the legislature was to
abrogate P.D. 921, it would have included it in such repealing clause, as it did in expressly
rendering of no force and effect several other presidential decrees. Hence, any repeal or
modification of P.D. 921 can only be possible under par. (f) of said Section 534, as follows:
(f) All general and special laws, acts, city charter, decrees, executive
orders, proclamations and administrative regulations, part or parts thereof
which are inconsistent with any of the provisions of the Code are hereby
repealed or modified accordingly.
The foregoing partakes of the nature of a general repealing provision. It is a basic rule of
statutory construction that repeals by implication are not favored. An implied repeal will not
be allowed unless it is convincingly and unambiguously demonstrated that the two laws are so
clearly repugnant and patently inconsistent that they cannot co-exist. This is based on the
rationale that the will of the legislature cannot be overturned by the judicial function of
construction and interpretation. Courts cannot take the place of Congress in repealing statutes.
Their function is to try to harmonize, as much as possible, seeming conflicts in the laws and
resolve doubts in favor of their validity and co-existence.
In Villegas v. Subido,11 the issue raised before the Court was whether the Decentralization
Act had the effect of repealing what was specifically ordained in the Charter of the City of
Manila. Under the Charter, it was provided in its Section 22 that "The President of the
Philippines with the consent of the Commission on Appointments shall appoint . . . the City
Treasurer and his Assistant." Under the Decentralization Act, it was provided that "All other
employees, except teachers paid out of provincial, city or municipal general funds and other
local funds shall . . . be appointed by the provincial governor, city or municipal mayor upon
recommendation of the head of office concerned."
The Court, in holding that there was no implied repeal in this
case12 , said:
. . . It has been the constant holding of this Court that repeals by
implication are not favored and will not be so declared unless it be
manifest that the legislature so intended. Such a doctrine goes as far back
as United States v. Reyes, a 1908 decision (10 Phil. 423, Cf. U.S. v.
Academia, 10 Phil. 431 [1908]). It is necessary then before such a repeal is
deemed to exist that it be shown that the statutes or statutory provisions
deal with the same subject matter and that the latter be inconsistent with
the former. (Cf. Calderon v. Provincia del Santisimo Rosario, 28 Phil. 164
[1914]). There must be a showing of repugnancy clear and convincing in
character. The language used in the latter statute must be such as to render
it irreconcilable with what has been formerly enacted. An inconsistency
that falls short of that standard does not suffice. What is needed is a
manifest indication of the legislative purpose to repeal. [Citing numerous
cases]
More specifically, a subsequent statute, general in character as to its terms
and application, is not to be construed as repealing a special or specific
enactment, unless the legislative purpose to do so is manifest. This is so
even if the provisions of the latter are sufficiently comprehensive to
include what was set forth in the special act. This principle has likewise
been consistently applied in decisions of the Court from Manila Railroad
Co. v. Rafferty (40 Phil 224), decided as far back as 1919. A citation from
an opinion of Justice Tuason is illuminating. Thus: "From another angle
the presumption against repeal is stronger. A special law is not regarded as
having been amended or repealed by a general law unless the intent to
repeal or alter is manifest. Generalia specialibus non derogant. An this is
true although the terms of the general act are broad enough to include the
matter in the special statute. . . . At any rate, in the event harmony between
provisions of this type in the same law or in two laws is impossible, the
specific provision controls unless the statute, considered in its entirety,
indicates a contrary intention upon the part of the legislature. . . . A
general law is one which embraces a class of subjects or places and does
not omit any subject or place naturally belonging to such class, while a
special act is one which relates to particular persons or things of a class."
(citing Valera v. Tuason, 80 Phil. 823, 827-828 [1948].)
In the relatively recent case of Mecano vs. Commission on Audit 13 , the Court en banc had
occasion to reiterate and to reinforce the rule against implied repeals, as follows:
Repeal by implication proceeds on the premise that where a statute of later
date clearly reveals an intention on the part of the legislature to abrogate a
prior act on the subject, that intention must be given effect. Hence, before
there can be a repeal, there must be a clear showing on the part of the law
maker that the intent in enacting the new law was to abrogate the old one.
The intention to repeal must be clear and manifest; otherwise, at least, as a
4
 general rule, the later act is to be construed as a continuation of, and not a
substitute for, the first act and will continue so far as the two acts are the
same from the time of the first enactment.
There are two categories of repeal by implication. The first is where
provisions in the two acts on the same subject matter are in an
irreconcilable conflict, the later act to the extent of the conflict constitutes
an implied repeal of the earlier one. The second is if the later act covers
the whole subject of the earlier one and is clearly intended as a substitute,
it will operate to repeal the earlier law.
Implied repeal by irreconcilable inconsistency take place when the two
statutes cover the same subject matter; they are so clearly inconsistent and
incompatible with each other that they cannot be reconciled or
harmonized; and both cannot be given effect, that is that one law cannot be
enforced without nullifying the other.
In the same vein, but in different words, this Court ruled in Gordon vs. Veridiano 14 :
Courts of justice, when confronted with apparently conflicting statutes,
should endeavor to reconcile the same instead of declaring outright the
invalidity of one as against the other. Such alacrity should be avoided. The
wise policy is for the judge to harmonize them if this is possible, bearing
in mind that they are equally the handiwork of the same legislature, and so
give effect to both while at the same time also according due respect to a
coordinate department of the government. It is this policy the Court will
apply in arriving at the interpretation of the laws above-cited and the
conclusions that should follow therefrom.
In the instant case, and using the Courts' standard for implied repeal in Mecano, we compared
the two laws.
Presidential Decree No. 921 was promulgated on 12 April 1976, with the aim of, inter alia,
evolving "a progressive revenue raising program that will not unduly burden the tax payers . . .
" 15 in Metropolitan Manila. Hence, it provided for the "administration of local financial
services in Metropolitan Manila" only, and for this purpose, divided the area into four Local
Treasury and Assessment Districts, regulated the duties and functions of the treasurers and
assessors in the cities and municipalities in said area and spelled out the process of assessing,
imposing and distributing the proceeds of real estate taxes therein.
Upon the other hand, Republic Act No. 7160, otherwise "known and cited as the Local
'Government Code of 1991'" 16 took effect on 01 January 1992 17. It declared "genuine and
meaningful local autonomy" as a policy of the state. Such policy was meant to decentralize
government "powers, authority, responsibilities and resources" from the national government
to the local government units "to enable them to attain their fullest development as self-reliant
communities and make them more effective partners in the attainment of national goals."18 In
the formulation and implementation of policies and measures on local autonomy, ''(l)ocal
government units may group themselves, consolidate or coordinate their efforts, services and
resources for purposes commonly beneficial to them." 19
From the above, it is clear that the two laws are not co-extensive and mutually inclusive in
their scope and purpose. While R.A. 7160 covers almost all governmental functions delegated
to local government units all over the country, P.D. 921 embraces only the Metropolitan
Manila area and is limited to the administration of financial services therein, especially the
assessment and collection of real estate (and some other local) taxes.
Coming down to specifics, Sec. 9 of P.D. 921 requires that the schedule of values of real
properties in the Metropolitan Manila area shall be prepared jointly by the city assessors in the
districts created therein: while Sec. 212 of R.A. 7160 states that the schedule shall be prepared
"by the provincial, city and municipal assessors of the municipalities within the Metropolitan
Manila Area for the different classes of real property situated in their respective local
government units for enactment by ordinance of the sanggunian concerned. . . ."
It is obvious that harmony in these provisions is not only possible, but in fact desirable,
necessary and consistent with the legislative intent and policy. By reading together and
harmonizing these two provisions, we arrive at the following steps in the preparation of the
said schedule, as follows:
1. The assessor in each municipality or city in the Metropolitan Manila
area shall prepare his/her proposed schedule of values, in accordance with
Sec. 212, R.A. 7160.
2. Then, the Local Treasury and Assessment District shall meet, per Sec.
9, P.D. 921. In the instant case, that district shall be composed of the
assessors in Quezon City, Pasig, Marikina, Mandaluyong and San Juan,
pursuant to Sec. 1 of said P.D. In this meeting, the different assessors shall
compare their individual assessments, discuss and thereafter jointly agree
and produce a schedule of values for their district, taking into account the
preamble of said P.D. that they should evolve "a progressive revenue
raising program that will not unduly burden the taxpayers".
3. The schedule jointly agreed upon by the assessors shall then be
published in a newspaper of general circulation and submitted to the
sanggunian concerned for enactment by ordinance, per Sec. 212, R.A.
7160.
By this harmonization, both the preamble of P.D. 921 decreeing that the real estate taxes shall
"not unduly burden the taxpayer" and the "operative principle of decentralization" provided
under Sec. 3, R.A. 7160 encouraging local government units to "consolidate or coordinate
their efforts, services and resources" shall be fulfilled. Indeed the essence of joint local action
for common good so cherished in the Local Government Code finds concrete expression in
this harmonization.
5
How about respondents' claim that, with the express repeal of P.D. 464, P.D. 921 — being
merely a "supplement" of said P.D. — cannot "exist independently on its own"? Quite the
contrary is true. By harmonizing P.D. 921 with R.A. 7160, we have just demonstrated that it
can exist outside of P.D. 464, as a support, supplement and extension of R.A. 7160, which for
this purpose, has replaced P.D. 464.
Since it is now clear that P.D. 921 is still good law, it is equally clear that this Court's ruling in
the Mathay/Javier/Puyat-Reyes cases (supra) is still the prevailing and applicable doctrine.
And, applying the said ruling in the present case, it is likewise clear that the schedule of values
prepared solely by the respondent municipal assessor is illegal and void.
Re: The Second Issue:
Exhaustion of Administrative Remedies
We now come to the second issue. The provisions of Sections 226 and 252 of R.A. 7160 being
material to this issue, are set forth below:
Sec. 226. Local Board of Assessment Appeals. — Any owner or person
having legal interest in the property who is not satisfied with the action of
the provincial, city or municipal assessor in the assessment of his property
may, within sixty (60) days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment Appeals of the province or
city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or
documents submitted in support of the appeal.
Sec. 252. Payment under Protest. — (a) No protest shall be entertained
unless the taxpayer first pays the tax. There shall be annotated on the tax
receipts the words "paid under protest". The protest in writing must be
filed within thirty (30) days from payment of the tax to the provincial, city
treasurer or municipal treasurer, in the case of a municipality within
Metropolitan Manila Area, who shall decide the protest within sixty (60)
days from receipt.
(b) The tax or a portion thereof paid under protest shall be held in trust by
the treasurer concerned.
(c) In the event that the protest is finally decided in favor of the taxpayer,
the amount or portion of the tax protested shall be refunded to the
protestant, or applied as tax credit against his existing or future tax
liability.
(d) In the event that the protest is denied or upon the lapse of the sixty-day
period prescribed in subparagraph (a), the taxpayer may avail of the
remedies as provided for in Chapter 3, Title Two, Book II of this Code.
Respondents argue that this case is premature because petitioners neither appealed the
questioned assessments on their properties to the Board of Assessment Appeal, pursuant to
Sec. 226, nor paid the taxes under protest, per Sec. 252.
We do not agree. Although as a rule, administrative remedies must first be exhausted before
resort to judicial action can prosper, there is a well-settled exception in cases where the
controversy does not involve questions of fact but only of law. 20 In the present case, the
parties, even during the proceedings in the lower court on 11 April 1994, already agreed "that
the issues in the petition are legal" 21 , and thus, no evidence was presented in said court.
In laying down the powers of the Local Board of Assessment Appeals, R.A. 7160 provides in
Sec. 229 (b) that "(t)he proceedings of the Board shall be conducted solely for the purpose of
ascertaining the facts . . . ." It follows that appeals to this Board may be fruitful only where
questions of fact are involved. Again, the protest contemplated under Sec. 252 of R.A. 7160 is
needed where there is a question as to the reasonableness of the amount assessed. Hence, if a
taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is
required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not
act on his protest. In the case at bench however, the petitioners are questioning the very
authority and power of the assessor, acting solely and independently, to impose the assessment
and of the treasurer to collect the tax. These are not questions merely of amounts of the
increase in the tax but attacks on the very validity of any increase.
Finally, it will be noted that in the consolidated cases of Mathay/Javier/Puyat-Reyes cited
earlier, the Supreme Court referred the petitions (which similarly questioned the schedules of
market values prepared solely by the respective assessors in the local government units
concerned) to the Board of Assessment Appeal, not for the latter, to exercise its appellate
jurisdiction, but rather to act only as a fact-finding commission. Said the
Court 22 thru Chief Justice Andres R. Narvasa:
On November 5, 1991, the Court issued a Resolution clarifying its earlier
one of May 16, 1991. It pointed out that the authority of the Central Board
of Assessment Appeals "to take cognizance of the factual issues raised in
these two cases by virtue of the referral by this Court in the exercise of its
extraordinary or certiorari jurisdiction should not be confused with its
appellate jurisdiction over appealed assessment cases under Section 36 of
P.D. 464 otherwise known as the Real Property Tax Code. The Board is
not acting in its appellate jurisdiction in the instant cases but rather, it is
acting as a Court-appointed fact-finding commission to assist the Court in
resolving the factual issues raised in G.R. Nos. 97618 and 97760."
In other words, the Court gave due course to the petitions therein in spite of the fact that the
petitioners had not, a priori, exhausted administrative remedies by filing an appeal before said
Board. Because there were factual issues raised in the Mathay, et al. cases, the Supreme Court
constituted the Central Board of Assessment Appeals as a fact-finding body to assist the Court
in resolving said factual issues. But in the instant proceedings, there are no such factual issues.
Therefore, there is no reason to require petitioners to exhaust the administrative remedies
provided in R.A. 7160, nor to mandate a referral by this Court to said Board.
6
 Re: The Third Issue:
Constitutionality of the Assessments
Having already definitively disposed of the case through the resolution of the foregoing two
issues, we find no more need to pass upon the third. It is axiomatic that the constitutionality of
a law, regulation, ordinance or act will not be resolved by courts if the controversy can be, as
in this case it has been, settled on other grounds. In the recent case of Macasiano vs. National
Housing Authority 23 , this Court declared:
It is a rule firmly entrenched in our jurisprudence that the constitutionality
of an act of the legislature will not be determined by the courts unless that
question is properly raised and presented in appropriate cases and is
necessary to a determination of the case, i.e., the issue of constitutionality
must be the very lis mota presented. To reiterate, the essential requisites
for a successful judicial inquiry into the constitutionality of a law are: (a)
the existence of an actual case or controversy involving a conflict of legal
rights susceptible of judicial determination, (b) the constitutional question
must be raised by a proper party, (c) the constitutional question must be
raised at the earliest opportunity, and (d) the resolution of the
constitutional question must be necessary to the decision of the case.
(emphasis supplied)
The aforequoted decision in Macasiano merely reiterated the ruling in Laurel vs. Garcia 24,
where this Court held:
The Court does not ordinarily pass upon constitutional questions unless
these questions are properly raised in appropriate cases and their
resolution is necessary for the determination of the case (People v. Vera,
65 Phil. 56 [1937]). The Court will not pass upon a constitutional question
although properly presented by the record if the case can be disposed of
on some other ground such as the application of a statute or general law
(Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad
Commission v. Pullman Co., 312 U.S. 496 [1941]). 25 (emphasis
supplied)
In view of the foregoing ruling, the question may be asked: what happens to real estate tax
payments already made prior to its promulgation and finality? Under the law 26 , "the taxpayer
may file a written claim for refund or credit for taxes and interests . . . ."
Finally, this Tribunal would be remiss in its duty as guardian of the judicial branch if we let
pass unnoticed the ease by which the respondent Judge consigned "to the statutes' graveyard" a
legislative enactment "together with the (three) decisions of the Supreme Court" promulgated
jointly and unanimously en banc. An elementary regard for the sacredness of laws and the
stability of judicial doctrines laid down by superior authority should have constrained him to
be more circumspect in rendering his decision and to spell out carefully and precisely the
reasons for his decision to invalidate such acts, instead of imperiously decreeing an implied
repeal. He knows or should have known the legal precedents against implied repeals.
Respondent Judge, in his decision, did not even make an attempt to try to reconcile or
harmonize the laws involved. Instead, he just unceremoniously swept them and this Court's
decisions into the dustbin of "judicial history." In his future acts and decisions, he is
admonished to be more judicious in setting aside established laws, doctrines and precedents.
WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the
questioned Decision and Order of respondent Judge, DECLARING as null and void the
questioned Schedule of Market Values for properties in Pasig City prepared by respondent
Assessor, as well as the corresponding assessments and real estate tax increases based thereon;
and ENJOINING the respondent Treasurer from collecting the real estate tax increases made
on the basis of said Schedule and assessments. No costs.
SO ORDERED.
G.R. No. 185023               August 24, 2011
CITY OF PASIG, REPRESENTED BY THE CITY TREASURER and THE CITY
ASSESSOR, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL
COMMISSION ON GOOD GOVERNMENT, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The petition
challenges the 17 October 2008 Decision2 of the Court of Appeals in CA-G.R. SP No. 97498,
affirming the 6 November 2006 Decision3 of the Regional Trial Court (RTC), National
Capital Judicial Region, Pasig City, Branch 155, in SCA No. 2901.
The Facts
Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land, with a total
area of 18.4891 hectares, situated in Pasig City. The properties are covered by Transfer
Certificate of Title (TCT) Nos. 337158 and 469702 and Tax Declaration Nos. E-030-01185
and E-030-01186 under the name of MPLDC. Portions of the properties are leased to different
business establishments.
In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos), voluntarily surrendered
MPLDC to the Republic of the Philippines.
7
On 30 September 2002, the Pasig City Assessor’s Office sent MPLDC two notices of tax
delinquency for its failure to pay real property tax on the properties for the period 1979 to
2001 totaling ₱256,858,555.86. In a letter dated 29 October 2002, Independent Realty
Corporation (IRC) President Ernesto R. Jalandoni (Jalandoni) and Treasurer Rosario Razon
informed the Pasig City Treasurer that the tax for the period 1979 to 1986 had been paid, and
that the properties were exempt from tax beginning 1987.
In letters dated 10 July 2003 and 8 January 2004, the Pasig City Treasurer informed MPLDC
and IRC that the properties were not exempt from tax. In a letter dated 16 February 2004,
MPLDC General Manager Antonio Merelos (Merelos) and Jalandoni again informed the Pasig
City Treasurer that the properties were exempt from tax. In a letter dated 11 March 2004, the
Pasig City Treasurer again informed Merelos that the properties were not exempt from tax.
On 20 October 2005, the Pasig City Assessor’s Office sent MPLDC a notice of final demand
for payment of tax for the period 1987 to 2005 totaling ₱389,027,814.48. On the same day,
MPLDC paid ₱2,000,000 partial payment under protest.
On 9 November 2005, MPLDC received two warrants of levy on the properties. On 1
December 2005, respondent Republic of the Philippines, through the Presidential Commission
on Good Government (PCGG), filed with the RTC a petition for prohibition with prayer for
issuance of a temporary restraining order or writ of preliminary injunction to enjoin petitioner
Pasig City from auctioning the properties and from collecting real property tax.
On 2 December 2005, the Pasig City Treasurer offered the properties for sale at public auction.
Since there was no other bidder, Pasig City bought the properties and was issued the
corresponding certificates of sale.
On 19 December 2005, PCGG filed with the RTC an amended petition for certiorari,
prohibition and mandamus against Pasig City. PCGG prayed that: (1) the assessments for the
payment of real property tax and penalty be declared void; (2) the warrants of levy on the
properties be declared void; (3) the public auction be declared void; (4) the issuance of
certificates of sale be declared void; (5) Pasig City be prohibited from assessing MPLDC real
property tax and penalty; (6) Pasig City be prohibited from collecting real property tax and
penalty from MPLDC; (7) Pasig City be ordered to assess the actual occupants of the
properties real property tax and penalty; and (8) Pasig City be ordered to collect real property
tax and penalty from the actual occupants of the properties.
The RTC’s Ruling
In its 6 November 2006 Decision, the RTC granted the petition for certiorari, prohibition and
mandamus. The RTC held:
The primordial issue to be resolved in the present case is whether or not respondent City of
Pasig, through the City Treasurer and the City Assessor, acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it assessed, levied and sold in public auction
the "payanig" properties for non-payment of real property taxes.
However, before dwelling on the merits of the main issue, certain matters need to be addressed
by the Court, to wit:
1. Does the Court have jurisdiction over the instant petition?
2. Who owns the so-called "payanig" properties that were subjected to payment of
real property taxes by respondent?
The Court maintains that it is not precluded from assuming jurisdiction over the instant
amended petition which involves the legality of the assailed actions by respondent in assessing
and collecting real property tax on the properties owned by the Republic of the Philippines. It
is a jurisprudential doctrine that the issue is purely legal when the authority of the respondent
to assess and collect real property taxes on the subject properties is being questioned (Ty vs.
Trampe, 250 SCRA 500).
xxxx
In the instant proceeding, there is no dispute that the properties are surrendered ill-gotten
wealth of former President Marcos. As such, the same assumes [sic] a public character and
thus belongs [sic] to the Republic of the Philippines. x x x
xxxx
Hence, upon the voluntary surrender by Jose Y. Campos, the controlling owner of Mid-Pasig
and Independent Realty Corporation, of the "payanig" properties to PCGG, a clear admission
that these properties were part of the ill-gotten wealth of former President Marcos was already
evident. As such, there was already constructive reconveyance to the State, which immediately
placed these reconveyed properties under the control and stewardship of the PCGG as
representative of the Republic of the Philippines. Under such special circumstance, these
voluntary surrendered properties had already belonged to the State.
xxxx
Premised on the foregoing, the "payanig" properties, being part of the recovered ill-gotten
wealth of President Marcos, and therefore are owned by the State itself, are exempt from
payment of real property taxes. It is only when the beneficial use of said properties has been
granted to a taxable person that the same may be subject to imposition of real property tax.
Furthermore, in real estate taxation, the unpaid tax attaches to the property and is chargeable
against the taxable person who had actual or beneficial use and possession of it regardless of
whether or not he is the owner (Testate Estate of Concordia T. Lim vs. City of Manila, 182
SCRA 482).
In the instant case, the taxable persons being referred to are the lessees occupying and/or doing
business therein and have beneficial use over portions within the "payanig" properties.
8
xxxx
Consequently, there can be no iota of doubt that respondent City of Pasig abused its discretion
by committing the acts sought to be annulled herein despite knowledge of the fact that
ownership over the subject properties belong to petitioner. But what is more appalling in the
instant action is that such abuse was capriciously committed by respondent City of Pasig
against the sovereign State itself from where that atxing local government unit derives its very
existence. The spring cannot rise higher than its source.
xxxx
In sum, the acts of respondent in assessing real property taxes on properties owned and
controlled by the Republic of the Philippines, in collecting taxes from Mid-Pasig in lieu of the
actual occupants or beneficial users of certain portions thereof, and in auctioning said
properties in favor of respondent, followed by the corresponding certificate of sale, are all
unequivocally tainted with grave abuse of discretion amounting to lack or excess of
jurisdiction.
WHEREFORE, in the light of the foregoing, the instant Amended Petition is hereby
GRANTED.
Accordingly, the following acts of respondent are hereby ANNULLED and SET ASIDE.
1. the assessment dated September 30, 2002 for the payment of real property taxes
and penalties made by the City of Pasig on two (2) parcels of land covered by TCT
No. 337158 and TCT No. 469702 registered under the name of Mid-Pasig;
2. the warrants of levy dated November 8, 2005 issued thereon by the City of Pasig;
3. the subsequent public auction sale of subject properties held on December 2, 2005
followed by the issuance of the corresponding Certificate of Sale;
FURTHER, the City of Pasig is hereby PROHIBITED from further:
1. Assessing real property taxes and penalties charges [sic] on the said properties;
2. Collecting said taxes and penalty charges from the State;
3. Disposing or encumbering the subject properties or any portion thereof;
FURTHER, the City of Pasig is hereby COMMANDED:
1. To return or effect the refund of the amount of Two Million Pesos (Php
2,000,000.00) paid under protest by Mid-Pasig Land Development Corporation on
October 20, 2005, or credit the same amount to any outstanding tax liability that said
corporation may have with the City of Pasig; and
2. To assess and collect from the actual occupants or beneficial users of the subject
properties, and not from the State, whatever real property taxes and penalties that
may be due on the respective areas occupied by them.
SO ORDERED.4
Pasig City appealed to the Court of Appeals.
The Court of Appeals’ Ruling
In its 31 March 2008 Decision,5 the Court of Appeals set aside the RTC’s 6 November 2006
Decision. The Court of Appeals held:
We find nothing in PCGG’s petition that supports its claim regarding Pasig City’s alleged
grave abuse of discretion. It is undisputed that the subject parcels of land are registered in the
name of Mid-Pasig, a private entity. Although the government, through the PCGG have [sic]
sequestered Mid-Pasig and all its assets including the subject parcels of land, the sequestration
per se, did not operate to convert Mid-Pasig and its properties to public property. "The power
of the PCGG to sequester property claimed to be ‘ill-gotten’ means to place or cause to be
placed under its possession or control said property, or any building or office wherein any
such property and any records pertaining thereto may be found, including ‘business
enterprises and entities’ — for the purpose of preventing the destruction, concealment or
dissipation of, and otherwise conserving and preserving the same — until it can be
determined, through appropriate judicial proceedings, whether the property was in truth ‘ill-
gotten,’ i.e., acquired through or as a result of improper or illegal use of or the conversion of
funds belonging to the Government or any of its branches, instrumentalities, enterprises,
banks or financial institutions, or by taking undue advantage of official position, authority,
relationship, connection or influence, resulting in unjust enrichment of the ostensible owner
and great damage and prejudice to the State." x x x As such, prior to a valid court declaration
the "PCGG cannot perform acts of strict ownership of [sic] sequestered property. It is a mere
conservator." In view thereof and the fact that Mid-Pasig and its properties have not been
validly declared by the Sandiganbayan as "ill-gotten" wealth, the same are not yet public
properties. The PCGG even admitted that the transfer certificates of title covering the subject
parcels of land in the name of Mid-Pasig have not been cancelled due to an order of the
Sandiganbayan. The trial court also found that the subject parcels of land are the subject of
litigation between Ortigas and Company Limited Partnership and the PCGG in Civil Case No.
0093 pending before the Sandiganbayan. These facts clearly show that the Sandiganbayan has
not validly declared yet that the subject parcels of land are "ill-gotten" wealth. If so, they
cannot be claimed yet as properties of the State: they remain properties of a private entity.
Thus, Pasig City through its City Assessor and City Treasurer did not act with grave abuse of
discretion when it issued real property tax assessment on the subject parcels of land.
Even admitting that the subject parcels of land are already owned by the State, we still see no
grave abuse of discretion on the part of Pasig City when it issued the challenged tax
9
assessment, for it is well settled that the test of exemptions from taxation is the use of the
property for purposes mentioned in the Constitution. The owner of the property does not
matter. Even if he is not a tax-exempt entity, as long as the property is being used for religious,
charitable or educational purposes, the property is exempt from tax. Conversely, even if the
government owns the property, if the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person, the property is subject to tax. Here, the PCGG admitted that
portions of the subject properties were leased to private entities engaged in commercial
dealings. As well, the trial court found that lessees occupy different areas of the subject parcels
of land beginning 1992 until 2005. Therefore, considering that portions of the subject parcels
of land are used for commercial purposes, the duty imposed by law to owners and
administrators of real property to declare the same for tax purposes and the fact that the tax
declarations over the subject parcels of land are in the name of Mid-Pasig, again, Pasig City
did not act with grave abuse of discretion when it issued the challenged tax assessment.
The foregoing snowball to one conclusion — the allegations in PCGG’s petition imputing
grave abuse of discretion on the part of Pasig City, acting through the City Assessor and City
Treasurer, in the assessment and collection of the taxes were made in order to justify the filing
of the petition for certiorari, prohibition and mandamus with the trial court.
The extraordinary remedies of certiorari, prohibition and mandamus may be resorted to only
when there is no other plain, available, speedy and adequate remedy in the course of law.
Where administrative remedies are available, petitions for the issuance of these peremptory
writs do not lie in order to give the administrative body the opportunity to decide the matter by
itself correctly and to prevent unnecessary and premature resort to courts.
Republic Act No. 7160 or the Local Government Code of 1991, clearly sets forth the
administrative remedies available to a taxpayer or real property owner who is not satisfied
with the assessment or reasonableness of the real property tax sought to be collected. The
Supreme Court outlined said remedies, to wit:
Should the taxpayer/real property owner question the excessiveness or reasonableness of the
assessment, Section 252 directs that the taxpayer should first pay the tax due before his
protest can be entertained. There shall be annotated on the tax receipts the words "paid under
protest." It is only after the taxpayer has paid the tax due that he may file a protest in writing
within thirty days from payment of the tax to the Provincial, City or Municipal Treasurer, who
shall decide the protest within sixty days from receipt. In no case is the local treasurer obliged
to entertain the protest unless the tax due has been paid.
If the local treasurer denies the protest or fails to act upon it within the 60-day period
provided for in Section 252, the taxpayer/real property owner may then appeal or directly file
a verified petition with the LBAA within sixty days from denial of the protest or receipt of the
notice of assessment, as provided in Section 226 of R.A. No. 7160[.]
And, if the taxpayer is not satisfied with the decision of the LBAA, he may elevate the same to
the CBAA, which exercises exclusive jurisdiction to hear and decide all appeals from the
decisions, orders and resolutions of the Local Boards involving contested assessments of real
properties, claims for tax refund and/or tax credits or overpayments of taxes. An appeal may
be taken to the CBAA by filing a notice of appeal within thirty days from receipt thereof.
From the Central Board Assessment Appeals, the dispute may then be taken to the Court of
Tax Appeals by filing a verified petition for review under Rule 42 of the Revised Rules of
Court; to the Court of tax Appeals en banc; and finally to the Supreme Court via a petition for
review on certiorari pursuant to Rule 45 of the Revised Rules of Court.
We are not convinced with PCGG’s stance that their recourse of filing the petition for
certiorari, prohibition and mandamus before the trial court is proper as they are questioning
not merely the correctness of the tax assessment but the actions of Pasig City, through its City
Assessor and City Treasurer, which were done in grave abuse of discretion amounting to lack
or excess of jurisdiction.
The well-established rule is that allegations in the complaint and the character of the relief
sought determine the nature of an action. A perusal of the petition before the trial court plainly
shows that what is actually being assailed is the correctness of the assessments made by the
City Assessor of Pasig City on the subject parcels of land. PCGG claims, among others, that:
1) the subject parcels of land are exempt from real property taxation as they are public
property; 2) even if the subject parcels of land are subject to tax, as the beneficial use thereof
was granted to private persons and entities, only the portion thereof used for commerce is
subject to tax and the users thereof are the ones liable to pay the tax; and 3) the right of Pasig
City to collect the real property taxes pertaining to 1987 to 1998 has already prescribed. These
claims essentially involve questions of fact, which are improper in a petition for certiorari,
prohibition and mandamus; hence, the petition should have been brought, at the very first
instance, to the Local Board Assessment Appeals, which has authority to rule on the
objections of any interested party who is not satisfied with the action of the assessor. Under
the doctrine of primacy of administrative remedies, an error in the assessment must be
administratively pursued to the exclusion of ordinary courts whose decisions would be void
for lack of jurisdiction.
Granting that the assessor’s authority and the legality of the assessment are indeed an issue,
the proper remedy is a suit for the refund of the real property tax after paying the same under
protest. It must be pointed out that in order for the trial court to resolve the instant petition, the
issues of the correctness of the tax assessment and collection must also necessarily be dealt
with; hence, a petition for certiorari, prohibition and mandamus is not the proper remedy. x x x
[T]he resolution of the issues raised in the instant case involve examination and determination
of relevant and material facts, i.e. facts relating to the ownership of the subject parcels of land,
the portion of the subject parcel of land used for commercial purposes and the identities of the
lessees and the users thereof. Since resolution of factual issues is not allowed in a petition for
certiorari, prohibition and mandamus, the trial court is precluded from entertaining the
petition.
Finally, Section 252 of the R.A. No. 7160 requires payment under protest in assailing real
property tax assessment. Even an appeal shall not suspend the collection of the atx assessed
without prejudice to a later adjustment pending the outcome of the appeal. This principle is
consistent with the time-honored principle that taxes are the lifeblood of the nation. But the
10
PCGG failed to pay the tax assessment prior to questioning it before the trial court; hence, the
trial court should have dismissed PCGG’s petition in line with the Supreme Court
pronouncement that a trial court has no jurisdiction to entertain a similar petition absent
payment under protest.
In conclusion and taking all the foregoing into account, we hold that the trial court had no
jurisdiction to take cognizance and decide PCGG petition for certiorari, prohibition and
mandamus; the trial court should have dismissed the petition.6
PCGG filed a motion for reconsideration. In its 17 October 2008 Decision, the Court of
Appeals reversed itself. The Court of Appeals held:
At the outset, although as a rule, administrative remedies must first be exhausted before ersort
to judicial action can prosper, there is a well-settled exception in cases where the controversy
does not involve questions of fact but only of law. We find that the Republic has shown a
cause for the application of the foregoing exception. Essentially, the Republic has raised a
pure question of law — whether or not the City of Pasig has the power to impose real property
tax on the subject properties, which are owned by the State. It bears stressing that the Republic
did not raise any question concerning the amount of the real property tax or the determination
thereof. Thus, having no plain, speedy, and adequate remedy in law, the Republic correctly
resorted to judicial action via the petition for certiorari, prohibition, and mandamus, to seek
redress.
We are convinced that the subject properties were not sequestered by the government so as to
amount to a deprivation of property without due process of law; instead, they were voluntarily
surrendered to the State by Campos, a self-admitted crony of the then President Marcos. The
relinquishment of the subject properties to the State as ill-gotten wealth of Marcos, as
recognized by the Supreme Court, makes a judicial declaration that the same were ill-gotten
unnecessary. By virtue of said relinquishment, the State correctly exercised dominion over the
subject properties. Indubitably, the subject properties, being ill-gotten wealth, belong to the
State. x x x By its nature, ill-gotten wealth is owned by the State. As a matter of fact, the
Republic continues to exercise dominion over the subject properties.7
Hence, the present petition.
Issues
Pasig City raises as issues that the lower courts erred in granting PCGG’s petition for
certiorari, prohibition and mandamus and in ordering Pasig City to assess and collect real
property tax from the lessees of the properties.
The Court’s Ruling
The petition is partly meritorious.
As correctly found by the RTC and the Court of Appeals, the Republic of the Philippines owns
the properties. Campos voluntarily surrendered MPLDC, which owned the properties, to the
Republic of the Philippines. In Republic of the Philippines v. Sandiganbayan,8 the Court
stated:
x x x Jose Y. Campos, "a confessed crony of former President Ferdinand E. Marcos,"
voluntarily surrendered or turned over to the PCGG the properties, assets and corporations he
held in trust for the deposed President. Among the corporations he surrendered were the
Independent Realty Corporation and the Mid-Pasig Land Development Corporation.9
In Republic of the Philippines v. Sandiganbayan,10 the Court stated:
The antecedent facts are stated by the Solicitor General as follows:
xxxx
"3. Sometime in the later part of August 1987, defendant Jose D. Campos, Jr., having been
served with summons on August 5, 1987, filed with the respondent Court an undated
‘Manifestation and Motion to Dismiss Complaint with Respect to Jose D. Campos’ praying
that he be removed as party defendant from the complaint on the grounds that he had
‘voluntarily surrendered or turned over any share in his name on [sic] any of the corporations
referred to, aside from disclaiming any interest, ownership or right thereon to the Government
of the Republic of the Philippines’ and that he was ‘entitled to the immunity granted by the
Presidential Commission on Good Government pursuant to Executive Order No. 14, under the
Commission’s Resolution dated May 28, 1986 to Mr. Jose Y. Campos and his family’ he
‘being a member of the immediate family of Jose Y. Campos.’
xxxx
In the instant case, the PCGG issued a resolution dated May 28, 1986, granting immunity from
both civil and criminal prosecutions to Jose Y. Campos and his family. The pertinent
provisions of the resolution read as follows:
"3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this Commission, his
voluntary surrender of the properties and assets disclosed and declared by him to belong to
deposed President Ferdinand E. Marcos to the Government of the Republic of the Philippines,
his full, complete and truthful disclosures, and his commitment to pay a sum of money as
determined by the Philippine Government, this Commission has decided and agreed:
xxxx
Undoubtedly, this resolution embodies a compromise agreement between the PCGG on one
hand and Jose Y. Campos on the other. Hence, in exchange for the voluntary surrender of the
ill-gotten properties acquired by the then President Ferdinand E. Marcos and his family which
were in Jose Campos’ control, the latter and his family were given full immunity in both civil
and criminal prosecutions. x x x
11
xxxx
By virtue of the PCGG’s May 28, 1986 resolution, Jose Campos, Jr. was given full immunity
from both civil and criminal prosecutions in exchange for the "full cooperation of Mr. Jose Y.
Campos to this Commission, his voluntary surrender of the properties and assets disclosed and
declared by him to belong to deposed President Ferdinand E. Marcos to the Government of the
Republic of the Philippines, his full, complete and truthful disclosures, and his commitment to
pay a sum of money as determined by the Philippine Government." In addition, Campos, Jr.
had already waived and surrendered to the Republic his registered equity interest in the
Marcos/Romualdez corporations involved in the civil case.11
Even as the Republic of the Philippines is now the owner of the properties in view of the
voluntary surrender of MPLDC by its former registered owner, Campos, to the State, such
transfer does not prevent a third party with a better right from claiming such properties in the
proper forum. In the meantime, the Republic of the Philippines is the presumptive owner of
the properties for taxation purposes.
Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the
Philippines are exempt from real property tax "except when the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable person." Thus, the portions of
the properties not leased to taxable entities are exempt from real estate tax while the portions
of the properties leased to taxable entities are subject to real estate tax. The law imposes the
liability to pay real estate tax on the Republic of the Philippines for the portions of the
properties leased to taxable entities. It is, of course, assumed that the Republic of the
Philippines passes on the real estate tax as part of the rent to the lessees.
In Philippine Fisheries Development Authority v. Central Board of Assessment Appeals,12 the
Court held:
In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals, the Court
resolved the issue of whether the PFDA is a government-owned or controlled corporation or
an instrumentality of the national government. In that case, the City of Iloilo assessed real
property taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and
operated by PFDA. The Court held that PFDA is an instrumentality of the government
and is thus exempt from the payment of real property tax, thus:
The Court rules that the Authority is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property tax. However, said
exemption does not apply to the portions of the IFPC which the Authority leased to
private entities. With respect to these properties, the Authority is liable to pay property
tax. Nonetheless, the IFPC, being a property of public dominion cannot be sold at public
auction to satisfy the tax delinquency.
xxxx
This ruling was affirmed by the Court in a subsequent PFDA case involving the Navotas
Fishing Port Complex, which is also managed and operated by the PFDA. In consonance with
the previous ruling, the Court held in the subsequent PFDA case that the PFDA is a
government instrumentality not subject to real property tax except those portions of the
Navotas Fishing Port Complex that were leased to taxable or private persons and entities
for their beneficial use.
Similarly, we hold that as a government instrumentality, the PFDA is exempt from real
property tax imposed on the Lucena Fishing Port Complex, except those portions which are
leased to private persons or entities.13 (Emphasis supplied)
In Government Service Insurance System v. City Treasurer of the City of Manila,14 the Court
held:
x x x The tax exemption the property of the Republic or its instrumentalities carries
ceases only if, as stated in Sec. 234(a) of the LGC of 1991, "beneficial use thereof has
been granted, for a consideration or otherwise, to a taxable person." GSIS, as a
government instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC.
GSIS, however, lost in a sense that status with respect to the Katigbak property when it
contracted its beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax
assessment of Php 54,826,599.37 covering 1992 to 2002 over the subject Katigbak
property is valid insofar as said tax delinquency is concerned as assessed over said
property.15 (Emphasis supplied)
In Manila International Airport Authority v. Court of Appeals,16 the Court held:
x x x Section 234(a) of the Local Government Code states that real property owned by
the Republic loses its tax exemption only if the "beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person." MIAA, as a government
instrumentality, is not a taxable person under Section 133(o) of the local Government Code.
Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the
Airport Lands and Buildings, such fact does not make these real properties subject to real
estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private
entities are not exempt from real estate tax. For example, the land area occupied by
hangars that MIAA leases to private corporations is subject to real estate tax. In such a
case, MIAA has granted the beneficial use of such land area for a consideration to a
taxable person and therefore such land area is subject to real estate tax.17 (Emphasis
supplied)
In Lung Center of the Philippines v. Quezon City,18 the Court held:
x x x While portions of the hospital are used for the treatment of patients and the dispensation
of medical services to them, whether paying or non-paying, other portions thereof are being
leased to private individuals for their clinics and a canteen. Further, a portion of the land is
12
being leased to a private individual for her business enterprise under the business name
"Elliptical Orchids and Garden Center." Indeed, the petitioner’s evidence shows that it
collected ₱1,136,483.45 as rentals in 1991 and ₱1,679,999.28 for 1992 from the said lessees.
Accordingly, we hold that the portions of the land leased to private entities as well as those
parts of the hospital leased to private individuals are not exempt from such taxes. On the
other hand, the portions of the land occupied by the hospital and portions of the hospital used
for its patients, whether paying or non-paying, are exempt from real property taxes.19
(Emphasis supplied)
Article 420 of the Civil Code classifies as properties of public dominion those that are
"intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads" and those that "are intended for some public service or
for the development of the national wealth." Properties of public dominion are not only
exempt from real estate tax, they are exempt from sale at public auction. In Heirs of Mario
Malabanan v. Republic,20 the Court held that, "It is clear that property of public dominion,
which generally includes property belonging to the State, cannot be x x x subject of the
commerce of man."21
In Philippine Fisheries Development Authority v. Court of Appeals,22 the Court held:
x x x [T]he real property tax assessments issued by the City of Iloilo should be upheld only
with respect to the portions leased to private persons. In case the Authority fails to pay the
real property taxes due thereon, said portions cannot be sold at public auction to satisfy
the tax delinquency. In Chavez v. Public Estates Authority it was held that reclaimed lands
are lands of the public dominion and cannot, without Congressional fiat, be subject of a
sale, public or private x x x.
In the same vein, the port built by the State in the Iloilo fishing complex is a property of
the public dominion and cannot therefore be sold at public auction. Article 420 of the
Civil Code, provides:
"Article 420. The following things are property of public dominion:
1. Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar
character;
2. Those which belong to the State, without being for public use, and are intended
for some public service or for the development of the national wealth."
The Iloilo fishing port which was constructed by the State for public use and/or public
service falls within the term "port" in the aforecited provision. Being a property of
public dominion the same cannot be subject to execution or foreclosure sale. In like
manner, the reclaimed land on which the IFPC is built cannot be the object of a private or
public sale without Congressional authorization.23 (Emphasis supplied)
In Manila International Airport Authority,24 the Court held:
x x x [T]he Airport Lands and Buildings of MIAA are properties devoted to public use and
thus are properties of public dominion. Properties of public dominion are owned by the State
or the Republic. 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.
The term "ports x x x constructed by the Sate" includes airports and seaports. The Airport
Lands and Buildings of MIAA are intended for public use, and at the very least intended for
public service. Whether intended for public use or public service, the Airport Lands and
Buildings are properties of public dominion. As properties of public dominion, the the Airport
lands and Buildings are owned by the Republic and thus exempt from real estate tax under
Section 234(a) of the Local Government Code.
xxxx
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted
to public use, are properties of public dominion and thus owned by the State or the Republic of
the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which
includes public airports and seaports, as properties of public dominion and owned by the
Republic. As properties of public dominion owned by the Republic, there is no doubt
whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax
under Section 234(a) of the local Government Code. This Court has also repeatedly ruled
that properties of public dominion are not subject to execution or foreclosure sale.25
(Emphasis supplied)lawphi1
In the present case, the parcels of land are not properties of public dominion because they are
not "intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads." Neither are they "intended for some
public service or for the development of the national wealth." MPLDC leases portions of the
properties to different business establishments. Thus, the 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.
In sum, only those portions of the properties leased to taxable entities are subject to real estate
tax for the period of such leases. Pasig City must, therefore, issue to respondent new real
property tax assessments covering the portions of the properties leased to taxable entities. If
the Republic of the Philippines fails to pay the real property tax on the portions of the
13
properties leased to taxable entities, then such portions may be sold at public auction to satisfy
the tax delinquency.
WHEREFORE, the petition is PARTIALLY GRANTED. The Court SETS ASIDE the 17
October 2008 Decision of the Court of Appeals in CA-G.R. SP No. 97498 and declares VOID
the 30 September 2002 real property tax assessment issued by Pasig City on the subject
properties of Mid-Pasig Land Development Corporation, the 8 November 2005 warrants of
levy on the properties, and the 2 December 2005 auction sale. Pasig City is DIRECTED to
issue to respondent new real property tax assessments covering only the portions of the
properties actually leased to taxable entities, and only for the period of such leases. Interests
and penalties on such new real property tax assessment shall accrue only after receipt of such
new assessment by respondent.
SO ORDERED.
G.R. No. 144104             June 29, 2004
LUNG CENTER OF THE PHILIPPINES, petitioner,
vs.
QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of
Quezon City, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of
the Decision1 dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which
affirmed the decision of the Central Board of Assessment Appeals holding that the lot owned
by the petitioner and its hospital building constructed thereon are subject to assessment for
purposes of real property tax.
The Antecedents
The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established
on January 16, 1981 by virtue of Presidential Decree No. 1823.2 It is the registered owner of a
parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located
at Quezon Avenue corner Elliptical Road, Central District, Quezon City. The lot has an area of
121,463 square meters and is covered by Transfer Certificate of Title (TCT) No. 261320 of the
Registry of Deeds of Quezon City. Erected in the middle of the aforesaid lot is a hospital
known as the Lung Center of the Philippines. A big space at the ground floor is being leased to
private parties, for canteen and small store spaces, and to medical or professional practitioners
who use the same as their private clinics for their patients whom they charge for their
professional services. Almost one-half of the entire area on the left side of the building along
Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of
Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private
enterprise known as the Elliptical Orchids and Garden Center.
The petitioner accepts paying and non-paying patients. It also renders medical services to out-
patients, both paying and non-paying. Aside from its income from paying patients, the
petitioner receives annual subsidies from the government.
On June 7, 1993, both the land and the hospital building of the petitioner were assessed for
real property taxes in the amount of ₱4,554,860 by the City Assessor of Quezon City.3
Accordingly, Tax Declaration Nos. C-021-01226 (16-2518) and C-021-01231 (15-2518-A)
were issued for the land and the hospital building, respectively.4 On August 25, 1993, the
petitioner filed a Claim for Exemption5 from real property taxes with the City Assessor,
predicated on its claim that it is a charitable institution. The petitioner’s request was denied,
and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon
City (QC-LBAA, for brevity) for the reversal of the resolution of the City Assessor. The
petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is
exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are
exclusively used for charity patients and that the major thrust of its hospital operation is to
serve charity patients. The petitioner contends that it is a charitable institution and, as such, is
exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition
and holding the petitioner liable for real property taxes.6
The QC-LBAA’s decision was, likewise, affirmed on appeal by the Central Board of
Assessment Appeals of Quezon City (CBAA, for brevity)7 which ruled that the petitioner was
not a charitable institution and that its real properties were not actually, directly and
exclusively used for charitable purposes; hence, it was not entitled to real property tax
exemption under the constitution and the law. The petitioner sought relief from the Court of
Appeals, which rendered judgment affirming the decision of the CBAA.8
Undaunted, the petitioner filed its petition in this Court contending that:
A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT
ENTITLED TO REALTY TAX EXEMPTIONS ON THE GROUND THAT ITS
LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF ASSESSMENT,
ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR
CHARITABLE PURPOSES.
B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX
EXEMPT UNDER ITS CHARTER, PD 1823, SAID EXEMPTION MAY
NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION.
The petitioner avers that it is a charitable institution within the context of Section 28(3),
Article VI of the 1987 Constitution. It asserts that its character as a charitable institution is not
altered by the fact that it admits paying patients and renders medical services to them, leases
portions of the land to private parties, and rents out portions of the hospital to private medical
practitioners from which it derives income to be used for operational expenses. The petitioner
points out that for the years 1995 to 1999, 100% of its out-patients were charity patients and of
14
the hospital’s 282-bed capacity, 60% thereof, or 170 beds, is allotted to charity patients. It
asserts that the fact that it receives subsidies from the government attests to its character as a
charitable institution. It contends that the "exclusivity" required in the Constitution does not
necessarily mean "solely." Hence, even if a portion of its real estate is leased out to private
individuals from whom it derives income, it does not lose its character as a charitable
institution, and its exemption from the payment of real estate taxes on its real property. The
petitioner cited our ruling in Herrera v. QC-BAA9 to bolster its pose. The petitioner further
contends that even if P.D. No. 1823 does not exempt it from the payment of real estate taxes, it
is not precluded from seeking tax exemption under the 1987 Constitution.
In their comment on the petition, the respondents aver that the petitioner is not a charitable
entity. The petitioner’s real property is not exempt from the payment of real estate taxes under
P.D. No. 1823 and even under the 1987 Constitution because it failed to prove that it is a
charitable institution and that the said property is actually, directly and exclusively used for
charitable purposes. The respondents noted that in a newspaper report, it appears that graft
charges were filed with the Sandiganbayan against the director of the petitioner, its
administrative officer, and Zenaida Rivera, the proprietress of the Elliptical Orchids and
Garden Center, for entering into a lease contract over 7,663.13 square meters of the property
in 1990 for only ₱20,000 a month, when the monthly rental should be ₱357,000 a month as
determined by the Commission on Audit; and that instead of complying with the directive of
the COA for the cancellation of the contract for being grossly prejudicial to the government,
the petitioner renewed the same on March 13, 1995 for a monthly rental of only ₱24,000. They
assert that the petitioner uses the subsidies granted by the government for charity patients and
uses the rest of its income from the property for the benefit of paying patients, among other
purposes. They aver that the petitioner failed to adduce substantial evidence that 100% of its
out-patients and 170 beds in the hospital are reserved for indigent patients. The respondents
further assert, thus:
13. That the claims/allegations of the Petitioner LCP do not speak well of its record
of service. That before a patient is admitted for treatment in the Center, first
impression is that it is pay-patient and required to pay a certain amount as deposit.
That even if a patient is living below the poverty line, he is charged with high
hospital bills. And, without these bills being first settled, the poor patient cannot be
allowed to leave the hospital or be discharged without first paying the hospital bills
or issue a promissory note guaranteed and indorsed by an influential agency or
person known only to the Center; that even the remains of deceased poor patients
suffered the same fate. Moreover, before a patient is admitted for treatment as free
or charity patient, one must undergo a series of interviews and must submit all the
requirements needed by the Center, usually accompanied by endorsement by an
influential agency or person known only to the Center. These facts were heard and
admitted by the Petitioner LCP during the hearings before the Honorable QC-BAA
and Honorable CBAA. These are the reasons of indigent patients, instead of seeking
treatment with the Center, they prefer to be treated at the Quezon Institute. Can such
practice by the Center be called charitable?10
The Issues
The issues for resolution are the following: (a) whether the petitioner is a charitable institution
within the context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and
Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of the petitioner
are exempt from real property taxes.
The Court’s Ruling
The petition is partially granted.
On the first issue, we hold that the petitioner is a charitable institution within the context of the
1973 and 1987 Constitutions. To determine whether an enterprise is a charitable
institution/entity or not, the elements which should be considered include the statute creating
the enterprise, its corporate purposes, its constitution and by-laws, the methods of
administration, the nature of the actual work performed, the character of the services rendered,
the indefiniteness of the beneficiaries, and the use and occupation of the properties.11
In the legal sense, a charity may be fully defined as a gift, to be applied consistently with
existing laws, for the benefit of an indefinite number of persons, either by bringing their minds
and hearts under the influence of education or religion, by assisting them to establish
themselves in life or otherwise lessening the burden of government.12 It may be applied to
almost anything that tend to promote the well-doing and well-being of social man. It embraces
the improvement and promotion of the happiness of man.13 The word "charitable" is not
restricted to relief of the poor or sick.14 The test of a charity and a charitable organization are
in law the same. The test whether an enterprise is charitable or not is whether it exists to carry
out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or
private advantage.
Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to
the provisions of the decree, is to be administered by the Office of the President of the
Philippines with the Ministry of Health and the Ministry of Human Settlements. It was
organized for the welfare and benefit of the Filipino people principally to help combat the high
incidence of lung and pulmonary diseases in the Philippines. The raison d’etre for the creation
of the petitioner is stated in the decree, viz:
Whereas, for decades, respiratory diseases have been a priority concern, having been
the leading cause of illness and death in the Philippines, comprising more than 45%
of the total annual deaths from all causes, thus, exacting a tremendous toll on human
resources, which ailments are likely to increase and degenerate into serious lung
diseases on account of unabated pollution, industrialization and unchecked cigarette
smoking in the country;lavvph!l.net
Whereas, the more common lung diseases are, to a great extent, preventable, and
curable with early and adequate medical care, immunization and through prompt and
intensive prevention and health education programs;
15
 Whereas, there is an urgent need to consolidate and reinforce existing programs,
strategies and efforts at preventing, treating and rehabilitating people affected by
lung diseases, and to undertake research and training on the cure and prevention of
lung diseases, through a Lung Center which will house and nurture the above and
related activities and provide tertiary-level care for more difficult and problematical
cases;
Whereas, to achieve this purpose, the Government intends to provide material and
financial support towards the establishment and maintenance of a Lung Center for
the welfare and benefit of the Filipino people.15
The purposes for which the petitioner was created are spelled out in its Articles of
Incorporation, thus:
SECOND: That the purposes for which such corporation is formed are as follows:
1. To construct, establish, equip, maintain, administer and conduct an
integrated medical institution which shall specialize in the treatment, care,
rehabilitation and/or relief of lung and allied diseases in line with the
concern of the government to assist and provide material and financial
support in the establishment and maintenance of a lung center primarily to
benefit the people of the Philippines and in pursuance of the policy of the
State to secure the well-being of the people by providing them specialized
health and medical services and by minimizing the incidence of lung
diseases in the country and elsewhere.
2. To promote the noble undertaking of scientific research related to the
prevention of lung or pulmonary ailments and the care of lung patients,
including the holding of a series of relevant congresses, conventions,
seminars and conferences;
3. To stimulate and, whenever possible, underwrite scientific researches
on the biological, demographic, social, economic, eugenic and
physiological aspects of lung or pulmonary diseases and their control; and
to collect and publish the findings of such research for public
consumption;
4. To facilitate the dissemination of ideas and public acceptance of
information on lung consciousness or awareness, and the development of
fact-finding, information and reporting facilities for and in aid of the
general purposes or objects aforesaid, especially in human lung
requirements, general health and physical fitness, and other relevant or
related fields;
5. To encourage the training of physicians, nurses, health officers, social
workers and medical and technical personnel in the practical and scientific
implementation of services to lung patients;
6. To assist universities and research institutions in their studies about lung
diseases, to encourage advanced training in matters of the lung and related
fields and to support educational programs of value to general health;
7. To encourage the formation of other organizations on the national,
provincial and/or city and local levels; and to coordinate their various
efforts and activities for the purpose of achieving a more effective
programmatic approach on the common problems relative to the objectives
enumerated herein;
8. To seek and obtain assistance in any form from both international and
local foundations and organizations; and to administer grants and funds
that may be given to the organization;
9. To extend, whenever possible and expedient, medical services to the
public and, in general, to promote and protect the health of the masses of
our people, which has long been recognized as an economic asset and a
social blessing;
10. To help prevent, relieve and alleviate the lung or pulmonary afflictions
and maladies of the people in any and all walks of life, including those
who are poor and needy, all without regard to or discrimination, because
of race, creed, color or political belief of the persons helped; and to enable
them to obtain treatment when such disorders occur;
11. To participate, as circumstances may warrant, in any activity designed
and carried on to promote the general health of the community;
12. To acquire and/or borrow funds and to own all funds or equipment,
educational materials and supplies by purchase, donation, or otherwise and
to dispose of and distribute the same in such manner, and, on such basis as
the Center shall, from time to time, deem proper and best, under the
particular circumstances, to serve its general and non-profit purposes and
objectives;lavvphil.net
13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer
and dispose of properties, whether real or personal, for purposes herein
mentioned; and
14. To do everything necessary, proper, advisable or convenient for the
accomplishment of any of the powers herein set forth and to do every
other act and thing incidental thereto or connected therewith.16
16
Hence, the medical services of the petitioner are to be rendered to the public in general in any
and all walks of life including those who are poor and the needy without discrimination. After
all, any person, the rich as well as the poor, may fall sick or be injured or wounded and
become a subject of charity.17
As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether out-
patient, or confined in the hospital, or receives subsidies from the government, so long as the
money received is devoted or used altogether to the charitable object which it is intended to
achieve; and no money inures to the private benefit of the persons managing or operating the
institution.18 In Congregational Sunday School, etc. v. Board of Review,19 the State Supreme
Court of Illinois held, thus:
… [A]n institution does not lose its charitable character, and consequent exemption
from taxation, by reason of the fact that those recipients of its benefits who are able
to pay are required to do so, where no profit is made by the institution and the
amounts so received are applied in furthering its charitable purposes, and those
benefits are refused to none on account of inability to pay therefor. The fundamental
ground upon which all exemptions in favor of charitable institutions are based is the
benefit conferred upon the public by them, and a consequent relief, to some extent,
of the burden upon the state to care for and advance the interests of its citizens.20
As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association
of South Dakota v. Baker:21
… [T]he fact that paying patients are taken, the profits derived from attendance upon
these patients being exclusively devoted to the maintenance of the charity, seems
rather to enhance the usefulness of the institution to the poor; for it is a matter of
common observation amongst those who have gone about at all amongst the
suffering classes, that the deserving poor can with difficulty be persuaded to enter an
asylum of any kind confined to the reception of objects of charity; and that their
honest pride is much less wounded by being placed in an institution in which paying
patients are also received. The fact of receiving money from some of the patients
does not, we think, at all impair the character of the charity, so long as the money
thus received is devoted altogether to the charitable object which the institution is
intended to further.22
The money received by the petitioner becomes a part of the trust fund and must be devoted to
public trust purposes and cannot be diverted to private profit or benefit.23
Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not
lose its character as a charitable institution simply because the gift or donation is in the form of
subsidies granted by the government. As held by the State Supreme Court of Utah in Yorgason
v. County Board of Equalization of Salt Lake County:24
Second, the … government subsidy payments are provided to the project. Thus,
those payments are like a gift or donation of any other kind except they come from
the government. In both Intermountain Health Care and the present case, the crux is
the presence or absence of material reciprocity. It is entirely irrelevant to this
analysis that the government, rather than a private benefactor, chose to make up the
deficit resulting from the exchange between St. Mark’s Tower and the tenants by
making a contribution to the landlord, just as it would have been irrelevant in
Intermountain Health Care if the patients’ income supplements had come from
private individuals rather than the government.
Therefore, the fact that subsidization of part of the cost of furnishing such housing is
by the government rather than private charitable contributions does not dictate the
denial of a charitable exemption if the facts otherwise support such an exemption, as
they do here.25
In this case, the petitioner adduced substantial evidence that it spent its income, including the
subsidies from the government for 1991 and 1992 for its patients and for the operation of the
hospital. It even incurred a net loss in 1991 and 1992 from its operations.
Even as we find that the petitioner is a charitable institution, we hold, anent the second issue,
that those portions of its real property that are leased to private entities are not exempt from
real property taxes as these are not actually, directly and exclusively used for charitable
purposes.
The settled rule in this jurisdiction is that laws granting exemption from tax are construed
strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the
rule and exemption is the exception. The effect of an exemption is equivalent to an
appropriation. Hence, a claim for exemption from tax payments must be clearly shown and
based on language in the law too plain to be mistaken.26 As held in Salvation Army v.
Hoehn:27
An intention on the part of the legislature to grant an exemption from the taxing
power of the state will never be implied from language which will admit of any
other reasonable construction. Such an intention must be expressed in clear and
unmistakable terms, or must appear by necessary implication from the language
used, for it is a well settled principle that, when a special privilege or exemption is
claimed under a statute, charter or act of incorporation, it is to be construed strictly
against the property owner and in favor of the public. This principle applies with
peculiar force to a claim of exemption from taxation . …28
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides
that the petitioner shall enjoy the tax exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock
corporation organized primarily to help combat the high incidence of lung and
pulmonary diseases in the Philippines, all donations, contributions, endowments and
equipment and supplies to be imported by authorized entities or persons and by the
Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and
benefit of the Lung Center, shall be exempt from income and gift taxes, the same
17
 further deductible in full for the purpose of determining the maximum deductible
amount under Section 30, paragraph (h), of the National Internal Revenue Code, as
amended.
The Lung Center of the Philippines shall be exempt from the payment of taxes,
charges and fees imposed by the Government or any political subdivision or
instrumentality thereof with respect to equipment purchases made by, or for the
Lung Center.29
It is plain as day that under the decree, the petitioner does not enjoy any property tax
exemption privileges for its real properties as well as the building constructed thereon . If the
intentions were otherwise, the same should have been among the enumeration of tax exempt
privileges under Section 2:
It is a settled rule of statutory construction that the express mention of one person,
thing, or consequence implies the exclusion of all others. The rule is expressed in the
familiar maxim, expressio unius est exclusio alterius.
The rule of expressio unius est exclusio alterius is formulated in a number of ways.
One variation of the rule is the principle that what is expressed puts an end to that
which is implied. Expressium facit cessare tacitum. Thus, where a statute, by its
terms, is expressly limited to certain matters, it may not, by interpretation or
construction, be extended to other matters.
...
The rule of expressio unius est exclusio alterius and its variations are canons of
restrictive interpretation. They are based on the rules of logic and the natural
workings of the human mind. They are predicated upon one’s own voluntary act and
not upon that of others. They proceed from the premise that the legislature would not
have made specified enumeration in a statute had the intention been not to restrict its
meaning and confine its terms to those expressly mentioned.30
The exemption must not be so enlarged by construction since the reasonable presumption is
that the State has granted in express terms all it intended to grant at all, and that unless the
privilege is limited to the very terms of the statute the favor would be intended beyond what
was meant.31
Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:
(3) Charitable institutions, churches and parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands, buildings, and improvements,
actually, directly and exclusively used for religious, charitable or educational
purposes shall be exempt from taxation.32
The tax exemption under this constitutional provision covers property taxes only.33 As Chief
Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission,
explained: ". . . what is exempted is not the institution itself . . .; those exempted from real
estate taxes are lands, buildings and improvements actually, directly and exclusively used for
religious, charitable or educational purposes."34
Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act
No. 7160 (otherwise known as the Local Government Code of 1991) as follows:
SECTION 234. Exemptions from Real Property Tax. – The following are exempted
from payment of the real property tax:
...
(b) Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, non-profit or religious cemeteries and all lands,
buildings, and improvements actually, directly, and exclusively used for
religious, charitable or educational purposes.35
We note that under the 1935 Constitution, "... all lands, buildings, and improvements used
‘exclusively’ for … charitable … purposes shall be exempt from taxation."36 However, under
the 1973 and the present Constitutions, for "lands, buildings, and improvements" of the
charitable institution to be considered exempt, the same should not only be "exclusively" used
for charitable purposes; it is required that such property be used "actually" and "directly" for
such purposes.37
In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on
our ruling in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on
September 30, 1961 before the 1973 and 1987 Constitutions took effect.38 As this Court held
in Province of Abra v. Hernando:39
… Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents
appurtenant thereto, and all lands, buildings, and improvements used exclusively for
religious, charitable, or educational purposes shall be exempt from taxation." The
present Constitution added "charitable institutions, mosques, and non-profit
cemeteries" and required that for the exemption of "lands, buildings, and
improvements," they should not only be "exclusively" but also "actually" and
"directly" used for religious or charitable purposes. The Constitution is worded
differently. The change should not be ignored. It must be duly taken into
consideration. Reliance on past decisions would have sufficed were the words
"actually" as well as "directly" not added. There must be proof therefore of the
actual and direct use of the lands, buildings, and improvements for religious or
charitable purposes to be exempt from taxation. …
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a
18
charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and
EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed and
enjoyed to the exclusion of others; debarred from participation or enjoyment; and
"exclusively" is defined, "in a manner to exclude; as enjoying a privilege exclusively."40 If
real property is used for one or more commercial purposes, it is not exclusively used for the
exempted purposes but is subject to taxation.41 The words "dominant use" or "principal use"
cannot be substituted for the words "used exclusively" without doing violence to the
Constitutions and the law.42 Solely is synonymous with exclusively.43
What is meant by actual, direct and exclusive use of the property for charitable purposes is the
direct and immediate and actual application of the property itself to the purposes for which the
charitable institution is organized. It is not the use of the income from the real property that is
determinative of whether the property is used for tax-exempt purposes.44
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903,
otherwise known as the Revised Charter of the Manila International Airport Authority
("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President
Ferdinand E. Marcos. Subsequently, Executive Order Nos. 909 1 and 2982 amended the MIAA
Charter.
As operator of the international airport, MIAA administers the land, improvements and
equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately
600 hectares of land,3 including the runways and buildings ("Airport Lands and Buildings")
then under the Bureau of Air Transportation. 4 The MIAA Charter further provides that no
portion of the land transferred to MIAA shall be disposed of through sale or any other mode
unless specifically approved by the President of the Philippines. 5

The petitioner failed to discharge its burden to prove that the entirety of its real property is On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion
actually, directly and exclusively used for charitable purposes. While portions of the hospital No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption
are used for the treatment of patients and the dispensation of medical services to them, from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
whether paying or non-paying, other portions thereof are being leased to private individuals negotiated with respondent City of Parañaque to pay the real estate tax imposed by the City.
for their clinics and a canteen. Further, a portion of the land is being leased to a private MIAA then paid some of the real estate tax already due.
individual for her business enterprise under the business name "Elliptical Orchids and Garden
Center." Indeed, the petitioner’s evidence shows that it collected ₱1,136,483.45 as rentals in On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City
1991 and ₱1,679,999.28 for 1992 from the said lessees. of Parañaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken
down as follows:
Accordingly, we hold that the portions of the land leased to private entities as well as those
parts of the hospital leased to private individuals are not exempt from such taxes.45 On the
TAX TAXABLE
other hand, the portions of the land occupied by the hospital and portions of the hospital used TAX DUE PENALTY TOTAL
DECLARATION YEAR
for its patients, whether paying or non-paying, are exempt from real property taxes.
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
respondent Quezon City Assessor is hereby DIRECTED to determine, after due hearing, the E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
precise portions of the land and the area thereof which are leased to private persons, and to E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
compute the real property taxes due thereon as provided for by law. SO ORDERED. E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
G.R. No. 155650             July 20, 2006 E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, *E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
vs.
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE,
SANGGUNIANG PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF *E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
PARAÑAQUE, and CITY TREASURER OF PARAÑAQUE, respondents. GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42

DECISION 1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75

CARPIO, J.: #9476101 for P28,676,480.00

The Antecedents #9476103 for P49,115.006

19
On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and
warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque
threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay
the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061.
The OGCC pointed out that Section 206 of the Local Government Code requires persons
exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of
the MIAA Charter is the proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition
and injunction, with prayer for preliminary injunction or temporary restraining order. The
petition sought to restrain the City of Parañaque from imposing real estate tax on, levying
against, and auctioning for public sale the Airport Lands and Buildings. The petition was
docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond
the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002
MIAA's motion for reconsideration and supplemental motion for reconsideration. Hence,
MIAA filed on 5 December 2002 the present petition for review. 7
Meanwhile, in January 2003, the City of Parañaque posted notices of auction sale at the
Barangay Halls of Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City; in the public
market of Barangay La Huerta; and in the main lobby of the Parañaque City Hall. The City of
Parañaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily
Inquirer, a newspaper of general circulation in the Philippines. The notices announced the
public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February
2003, 10:00 a.m., at the Legislative Session Hall Building of Parañaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this
Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining
Order. The motion sought to restrain respondents — the City of Parañaque, City Mayor of
Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer of Parañaque, and the
City Assessor of Parañaque ("respondents") — from auctioning the Airport Lands and
Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective
immediately. The Court ordered respondents to cease and desist from selling at public auction
the Airport Lands and Buildings. Respondents received the TRO on the same day that the
Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after
the conclusion of the public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the
directive issued during the hearing, MIAA, respondent City of Parañaque, and the Solicitor
General subsequently submitted their respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in
the name of MIAA. However, MIAA points out that it cannot claim ownership over these
properties since the real owner of the Airport Lands and Buildings is the Republic of the
Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings
for the benefit of the general public. Since the Airport Lands and Buildings are devoted to
public use and public service, the ownership of these properties remains with the State. The
Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local
governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from
the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under
Section 234 of the Local Government Code because the Airport Lands and Buildings are
owned by the Republic. To justify the exemption, MIAA invokes the principle that the
government cannot tax itself. MIAA points out that the reason for tax exemption of public
property is that its taxation would not inure to any public advantage, since in such a case the
tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly withdrew
the tax exemption privileges of "government-owned and-controlled corporations" upon the
effectivity of the Local Government Code. Respondents also argue that a basic rule of
statutory construction is that the express mention of one person, thing, or act excludes all
others. An international airport is not among the exceptions mentioned in Section 193 of the
Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport
Lands and Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8
where we held that the Local Government Code has withdrawn the exemption from real estate
tax granted to international airports. Respondents further argue that since MIAA has already
paid some of the real estate tax assessments, it is now estopped from claiming that the Airport
Lands and Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA
are exempt from real estate tax under existing laws. If so exempt, then the real estate tax
assessments issued by the City of Parañaque, and all proceedings taken pursuant to such
assessments, are void. In such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by
local governments.
20
First, MIAA is not a government-owned or controlled corporation but an instrumentality of
the National Government and thus exempt from local taxation. Second, the real properties of
MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not
exempt from real estate tax. Respondents claim that the deletion of the phrase "any
government-owned or controlled so exempt by its charter" in Section 234(e) of the Local
Government Code withdrew the real estate tax exemption of government-owned or controlled
corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax
Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real
estate tax. However, MIAA is not a government-owned or controlled corporation. Section
2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a
government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. – x x x x
(13) Government-owned or controlled corporation refers to any agency organized
as a stock or non-stock corporation, vested with functions relating to public needs
whether governmental or proprietary in nature, and owned by the Government
directly or through its instrumentalities either wholly, or, where applicable as in the
case of stock corporations, to the extent of at least fifty-one (51) percent of its
capital stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or non-stock
corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a
stock corporation because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares. Section 10 of the MIAA Charter9 provides:
SECTION 10. Capital. — The capital of the Authority to be contributed by the
National Government shall be increased from Two and One-half Billion
(P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and
such other properties, movable and immovable[,] which may be contributed by the
National Government or transferred by it from any of its agencies, the valuation of
which shall be determined jointly with the Department of Budget and Management
and the Commission on Audit on the date of such contribution or transfer after
making due allowances for depreciation and other deductions taking into account the
loans and other liabilities of the Authority at the time of the takeover of the assets
and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing about
seventy percentum (70%) of the unremitted share of the National Government from
1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of
E. O. No. 903 as amended, shall be converted into the equity of the National
Government in the Authority. Thereafter, the Government contribution to the capital
of the Authority shall be provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code 10 defines a stock corporation as one whose "capital stock is
divided into shares and x x x authorized to distribute to the holders of such shares
dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no
stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the
Corporation Code defines a non-stock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or officers." A non-stock corporation must
have members. Even if we assume that the Government is considered as the sole member of
MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot
distribute any part of their income to their members. Section 11 of the MIAA Charter
mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. 11
This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for
charitable, religious, educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like
chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is
organized to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
government-owned or controlled corporation. What then is the legal status of MIAA within
the National Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently
its governmental functions. MIAA is like any other government instrumentality, the only
difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory
Provisions of the Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. –– x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated
within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds,
and enjoying operational autonomy, usually through a charter. x x x (Emphasis
supplied)
21
When the law vests in a government instrumentality corporate powers, the instrumentality
does not become a corporation. Unless the government instrumentality is organized as a stock
or non-stock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain,12 police authority13 and the levying of fees and charges. 14 At the same time,
MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these
powers are not inconsistent with the provisions of this Executive Order." 15
Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated
with the department framework. The MIAA Charter expressly states that transforming MIAA
into a "separate and autonomous body"16 will make its operation more "financially viable." 17
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 government-owned or controlled corporation. 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 are sometimes loosely called government corporate entities. However, they
are not government-owned or controlled corporations in the strict sense as understood under
the Administrative Code, which is the governing law defining the legal relationship and status
of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local
Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. –
Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of
the following:
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities and local government units.(Emphasis and underscoring
supplied)
Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While
the 1987 Constitution now includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines and limitations as the
Congress may provide."18
When local governments invoke the power to tax on national government instrumentalities,
such power is construed strictly against local governments. The rule is that a tax is never
presumed and there must be clear language in the law imposing the tax. Any doubt whether a
person, article or activity is taxable is resolved against taxation. This rule applies with greater
force when local governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer claiming the
exemption. However, when Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed liberally in favor of the
national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to the
benefit of the government itself or its agencies. In such case the practical effect of an
exemption is merely to reduce the amount of money that has to be handled by
government in the course of its operations. For these reasons, provisions granting
exemptions to government agencies may be construed liberally, in favor of non tax-
liability of such agencies.19
There is, moreover, no point in national and local governments taxing each other, unless a
sound and compelling policy requires such transfer of public funds from one government
pocket to another.
There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is
when the legislature clearly intended to tax government instrumentalities for the delivery
of essential public services for sound and compelling policy considerations. There must be
express language in the law empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in
the Code, local governments cannot tax national government instrumentalities. As this Court
held in Basco v. Philippine Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede,
burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over
local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to
22
 prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable activities or
enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US
42).
The power to tax which was called by Justice Marshall as the "power to destroy"
(Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or
creation of the very entity which has the inherent power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion and therefore
owned by the State or the Republic of the Philippines. The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
(2) Those which belong to the State, without being for public use, and are intended
for some public service or for the development of the national wealth. (Emphasis
supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in
the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for public use
or for public service, shall form part of the patrimonial property of the State.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil
Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are
owned by the State. The term "ports" includes seaports and airports. The MIAA Airport
Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the
Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus
owned by the State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they are used by the
public for international and domestic travel and transportation. The fact that the MIAA
collects terminal fees and other charges from the public does not remove the character of the
Airport Lands and Buildings as properties for public use. The operation by the government of
a tollway does not change the character of the road as one for public use. Someone must pay
for the maintenance of the road, either the public indirectly through the taxes they pay the
government, or only those among the public who actually use the road through the toll fees
they pay upon using the road. The tollway system is even a more efficient and equitable
manner of taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the character of the property whether it
is of public dominion or not. Article 420 of the Civil Code defines property of public
dominion as one "intended for public use." Even if the government collects toll fees, the road
is still "intended for public use" if anyone can use the road under the same terms and
conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles
that can use the road, the speed restrictions and other conditions for the use of the road do not
affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to
airlines, constitute the bulk of the income that maintains the operations of MIAA. The
collection of such fees does not change the character of MIAA as an airport for public use.
Such fees are often termed user's tax. This means taxing those among the public who actually
use a public facility instead of taxing all the public including those who never use the
particular public facility. A user's tax is more equitable — a principle of taxation mandated in
the 1987 Constitution.21
The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the
Philippines for both international and domestic air traffic," 22 are properties of public dominion
because they are intended for public use. As properties of public dominion, they
indisputably belong to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of
public dominion. As properties of public dominion, the Airport Lands and Buildings are
outside the commerce of man. The Court has ruled repeatedly that properties of public
dominion are outside the commerce of man. As early as 1915, this Court already ruled in
Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce
of man, thus:
According to article 344 of the Civil Code: "Property for public use in provinces and
in towns comprises the provincial and town roads, the squares, streets, fountains,
and public waters, the promenades, and public works of general service supported
by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of
Cavite could not in 1907 withdraw or exclude from public use a portion thereof in
23
 order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a
portion of said plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by executing a
contract over a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the
commerce of man may be the object of a contract, and plazas and streets are outside
of this commerce, as was decided by the supreme court of Spain in its decision of
February 12, 1895, which says: "Communal things that cannot be sold because
they are by their very nature outside of commerce are those for public use, such
as the plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied)
23
Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion
are outside the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public use
and to be made available to the public in general. They are outside the commerce
of man and cannot be disposed of or even leased by the municipality to private
parties. While in case of war or during an emergency, town plazas may be occupied
temporarily by private individuals, as was done and as was tolerated by the
Municipality of Pozorrubio, when the emergency has ceased, said temporary
occupation or use must also cease, and the town officials should see to it that the
town plazas should ever be kept open to the public and free from encumbrances or
illegal private constructions.24 (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of
man, cannot be the subject of an auction sale. 25
Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale
of any property of public dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to encumbrances, foreclosures
and auction sale. This will happen if the City of Parañaque can foreclose and compel the
auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the President must first
withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public
Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law
governing the classification and disposition of lands of the public domain other than timber
and mineral lands,"27 provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and
Natural Resources, the President may designate by proclamation any tract or tracts
of land of the public domain as reservations for the use of the Republic of the
Philippines or of any of its branches, or of the inhabitants thereof, in accordance
with regulations prescribed for this purposes, or for quasi-public uses or purposes
when the public interest requires it, including reservations for highways, rights of
way for railroads, hydraulic power sites, irrigation systems, communal pastures or
lequas communales, public parks, public quarries, public fishponds, working men's
village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of
Section eighty-three shall be non-alienable and shall not be subject to
occupation, entry, sale, lease, or other disposition until again declared alienable
under the provisions of this Act or by proclamation of the President. (Emphasis
and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings
from public use, these properties remain properties of public dominion and are inalienable.
Since the Airport Lands and Buildings are inalienable in their present status as properties of
public dominion, they are not subject to levy on execution or foreclosure sale. As long as the
Airport Lands and Buildings are reserved for public use, their ownership remains with the
State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to
withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the
Government. — (1) The President shall have the power to reserve for 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;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by
law or presidential proclamation from public use, they are properties of public dominion,
owned by the Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.
Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like
MIAA to hold title to real properties owned by the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of
the Government is authorized by law to be conveyed, the deed of conveyance shall
be executed in behalf of the government by the following:
24
 (1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly vested by law
in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or instrumentality,
by the executive head of the agency or instrumentality. (Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer
because even its executive head cannot sign the deed of conveyance on behalf of the Republic.
Only the President of the Republic can sign such deed of conveyance. 28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and
Buildings from the Bureau of Air Transportation of the Department of Transportation and
Communications. The MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. — x x x x
The land where the Airport is presently located as well as the surrounding land
area of approximately six hundred hectares, are hereby transferred, conveyed
and assigned to the ownership and administration of the Authority, subject to
existing rights, if any. The Bureau of Lands and other appropriate government
agencies shall undertake an actual survey of the area transferred within one year
from the promulgation of this Executive Order and the corresponding title to be
issued in the name of the Authority. Any portion thereof shall not be disposed
through sale or through any other mode unless specifically approved by the
President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All existing
public airport facilities, runways, lands, buildings and other property, movable
or immovable, belonging to the Airport, and all assets, powers, rights, interests and
privileges belonging to the Bureau of Air Transportation relating to airport works
or air operations, including all equipment which are necessary for the operation of
crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis
supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the
Bureau of Air Transportation and Transitory Provisions. — The Manila
International Airport including the Manila Domestic Airport as a division under the
Bureau of Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the
Republic receiving cash, promissory notes or even stock since MIAA is not a stock
corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport
Lands and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the
Philippines for both international and domestic air traffic, is required to provide
standards of airport accommodation and service comparable with the best airports in
the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have
to be upgraded to meet the current and future air traffic and other demands of
aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the objectives
of providing high standards of accommodation and service within the context of
a financially viable operation, will best be achieved by a separate and
autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential
Decree No. 1772, the President of the Philippines is given continuing authority to
reorganize the National Government, which authority includes the creation of
new entities, agencies and instrumentalities of the Government[.] (Emphasis
supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to
MIAA was not meant to transfer beneficial ownership of these assets from the Republic to
MIAA. The purpose was merely to reorganize a division in the Bureau of Air
Transportation into a separate and autonomous body. The Republic remains the beneficial
owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No
party claims any ownership rights over MIAA's assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be
disposed through sale or through any other mode unless specifically approved by the
President of the Philippines." This only means that the Republic retained the beneficial
ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code,
only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the
Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and
Buildings without the Republic paying MIAA any consideration. Under Section 3 of the
MIAA Charter, the President is the only one who can authorize the sale or disposition of the
Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong
to the Republic.
25
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal
property owned by the Republic of the Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. — The following are exempted
from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which
prohibits local governments from imposing "[t]axes, fees or charges of any kind on the
National Government, its agencies and instrumentalities x x x." The real properties owned by
the Republic are titled either in the name of the Republic itself or in the name of agencies or
instrumentalities of the National Government. The Administrative Code allows real property
owned by the Republic to be titled in the name of agencies or instrumentalities of the national
government. Such real properties remain owned by the Republic and continue to be exempt
from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality
of the national government. This happens when title of the real property is transferred to an
agency or instrumentality even as the Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local
Government Code states that real property owned by the Republic loses its tax exemption only
if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o)
of the Local Government Code. Thus, even if we assume that the Republic has granted to
MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these
real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are
not exempt from real estate tax. For example, the land area occupied by hangars that MIAA
leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the
beneficial use of such land area for a consideration to a taxable person and therefore such
land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the
Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well
as those parts of the hospital leased to private individuals are not exempt from such
taxes. On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are
exempt from real property taxes.29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of
the Local Government Code of 1991 withdrew the tax exemption of " all persons, whether
natural or juridical" upon the effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges – Unless otherwise provided in
this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational institutions are hereby
withdrawn upon effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that
since the Local Government Code withdrew the tax exemption of all juridical persons, then
MIAA is not exempt from real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the
withdrawn exemptions from realty tax cover not just GOCCs, but all persons.
To repeat, the provisions lay down the explicit proposition that the withdrawal of
realty tax exemption applies to all persons. The reference to or the inclusion of
GOCCs is only clarificatory or illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons recognized
under our laws, natural and juridical persons. Obviously, MIAA is not a
natural person. Thus, the determinative test is not just whether MIAA is a
GOCC, but whether MIAA is a juridical person at all. (Emphasis and
underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt from local taxation
is its status — whether MIAA is a juridical person or not. The minority also insists that
"Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAA's
claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code
expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in
this Code." Now, Section 133(o) of the Local Government Code expressly provides
otherwise, specifically prohibiting local governments from imposing any kind of tax on
national government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. –
Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following:
xxxx
26
 (o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities, and local government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments cannot impose any
kind of tax on national government instrumentalities like the MIAA. Local governments are
devoid of power to tax the national government, its agencies and instrumentalities. The taxing
powers of local governments do not extend to the national government, its agencies and
instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of
Section 133. The saving clause refers to Section 234(a) on the exception to the exemption
from real estate tax of real property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical
persons are subject to tax by local governments. The minority insists that the juridical persons
exempt from local taxation are limited to the three classes of entities specifically enumerated
as exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b)
cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and
non-profit hospitals and educational institutions. It would be belaboring the obvious
why the MIAA does not fall within any of the exempt entities under Section 193.
(Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the Local
Government Code. This theory will result in gross absurdities. It will make the national
government, which itself is a juridical person, subject to tax by local governments since the
national government is not included in the enumeration of exempt entities in Section 193.
Under this theory, local governments can impose any kind of local tax, and not only real estate
tax, on the national government.
Under the minority's theory, many national government instrumentalities with juridical
personalities will also be subject to any kind of local tax, and not only real estate tax. Some of
the national government instrumentalities vested by law with juridical personalities are:
Bangko Sentral ng Pilipinas,30 Philippine Rice Research Institute,31 Laguna Lake
Development Authority,32 Fisheries Development Authority, 33 Bases Conversion Development
Authority,34 Philippine Ports Authority,35 Cagayan de Oro Port Authority, 36 San Fernando Port
Authority,37 Cebu Port Authority,38 and Philippine National Railways.39
The minority's theory violates Section 133(o) of the Local Government Code which expressly
prohibits local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) does not distinguish between national government
instrumentalities with or without juridical personalities. Where the law does not distinguish,
courts should not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative test whether
MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it
is a national government instrumentality under Section 133(o) of the Local Government Code.
Section 133(o) is the specific provision of law prohibiting local governments from imposing
any kind of tax on the national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise
provided in this Code." This means that unless the Local Government Code grants an express
authorization, local governments have no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local governments have no power to tax the national
government, its agencies and instrumentalities. As an exception to this rule, local governments
may tax the national government, its agencies and instrumentalities only if the Local
Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of
the Code, which makes the national government subject to real estate tax when it gives the
beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government
Code provides:
SEC. 234. Exemptions from Real Property Tax – The following are exempted from
payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The
exception to this exemption is when the government gives the beneficial use of the real
property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national
government, its agencies and instrumentalities are subject to any kind of tax by local
governments. The exception to the exemption applies only to real estate tax and not to any
other tax. The justification for the exception to the exemption is that the real property,
although owned by the Republic, is not devoted to public use or public service but devoted to
the private gain of a taxable person.
The minority also argues that since Section 133 precedes Section 193 and 234 of the Local
Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following
an accepted rule of construction, in case of conflict the subsequent provisions should
prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the
general exemptions attaching to instrumentalities under Section 133(o) of the Local
Government Code being qualified by Sections 193 and 234 of the same law.
(Emphasis supplied)
27
The minority assumes that there is an irreconcilable conflict between Section 133 on one hand,
and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much
less has any one presenteda persuasive argument that there is such a conflict. The minority's
assumption of an irreconcilable conflict in the statutory provisions is an egregious error for
two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193
expressly admits its subordination to other provisions of the Code when Section 193 states
"[u]nless otherwise provided in this Code." By its own words, Section 193 admits the
superiority of other provisions of the Local Government Code that limit the exercise of the
taxing power in Section 193. When a provision of law grants a power but withholds such
power on certain matters, there is no conflict between the grant of power and the withholding
of power. The grantee of the power simply cannot exercise the power on matters withheld
from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local
Government Units." Section 133 limits the grant to local governments of the power to tax, and
not merely the exercise of a delegated power to tax. Section 133 states that the taxing powers
of local governments "shall not extend to the levy" of any kind of tax on the national
government, its agencies and instrumentalities. There is no clearer limitation on the taxing
power than this.
Since Section 133 prescribes the "common limitations" on the taxing powers of local
governments, Section 133 logically prevails over Section 193 which grants local governments
such taxing powers. By their very meaning and purpose, the "common limitations" on the
taxing power prevail over the grant or exercise of the taxing power. If the taxing power of
local governments in Section 193 prevails over the limitations on such taxing power in Section
133, then local governments can impose any kind of tax on the national government, its
agencies and instrumentalities — a gross absurdity.
Local governments have no power to tax the national government, its agencies and
instrumentalities, except as otherwise provided in the Local Government Code pursuant to the
saving clause in Section 133 stating "[u]nless otherwise provided in this Code." This exception
— which is an exception to the exemption of the Republic from real estate tax imposed by
local governments — refers to Section 234(a) of the Code. The exception to the exemption in
Section 234(a) subjects real property owned by the Republic, whether titled in the name of the
national government, its agencies or instrumentalities, to real estate tax if the beneficial use of
such property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase
"government-owned or controlled corporation" is not controlling. The minority points out that
Section 2 of the Introductory Provisions of the Administrative Code admits that its definitions
are not controlling when it provides:
SEC. 2. General Terms Defined. — Unless the specific words of the text, or the
context as a whole, or a particular statute, shall require a different meaning:
xxxx
The minority then concludes that reliance on the Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code
recognizes that a statute may require a different meaning than that defined in the
Administrative Code. However, this does not automatically mean that the definition in the
Administrative Code does not apply to the Local Government Code. Section 2 of the
Administrative Code clearly states that "unless the specific words x x x of a particular statute
shall require a different meaning," the definition in Section 2 of the Administrative Code shall
apply. Thus, unless there is specific language in the Local Government Code defining the
phrase "government-owned or controlled corporation" differently from the definition in the
Administrative Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the
phrase "government-owned or controlled corporation" differently from the definition in the
Administrative Code. Indeed, there is none. The Local Government Code is silent on the
definition of the phrase "government-owned or controlled corporation." The Administrative
Code, however, expressly defines the phrase "government-owned or controlled corporation."
The inescapable conclusion is that the Administrative Code definition of the phrase
"government-owned or controlled corporation" applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code "incorporates in a
unified document the major structural, functional and procedural principles and rules of
governance." Thus, the Administrative Code is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and instrumentalities.
Unless a statute expressly provides for a different status and relationship for a specific
government unit or entity, the provisions of the Administrative Code prevail.
The minority also contends that the phrase "government-owned or controlled corporation"
should apply only to corporations organized under the Corporation Code, the general
incorporation law, and not to corporations created by special charters. The minority sees no
reason why government corporations with special charters should have a capital stock. Thus,
the minority declares:
I submit that the definition of "government-owned or controlled corporations" under
the Administrative Code refer to those corporations owned by the government or its
instrumentalities which are created not by legislative enactment, but formed and
organized under the Corporation Code through registration with the Securities and
Exchange Commission. In short, these are GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a capital
structure for GOCCs whose full ownership is limited by its charter to the State or
28
 Republic. Such GOCCs are not empowered to declare dividends or alienate their
capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and
existing legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled
corporation" does not distinguish between one incorporated under the Corporation Code or
under a special charter. Where the law does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several government-owned
corporations organized as stock corporations. Prime examples are the Land Bank of the
Philippines and the Development Bank of the Philippines. The special charter 40 of the Land
Bank of the Philippines provides:
SECTION 81. Capital. — The authorized capital stock of the Bank shall be nine
billion pesos, divided into seven hundred and eighty million common shares with a
par value of ten pesos each, which shall be fully subscribed by the Government, and
one hundred and twenty million preferred shares with a par value of ten pesos each,
which shall be issued in accordance with the provisions of Sections seventy-seven
and eighty-three of this Code. (Emphasis supplied)
41
Likewise, the special charter of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock – Par value. — The capital stock of the Bank
shall be Five Billion Pesos to be divided into Fifty Million common shares with par
value of P100 per share. These shares are available for subscription by the National
Government. Upon the effectivity of this Charter, the National Government shall
subscribe to Twenty-Five Million common shares of stock worth Two Billion Five
Hundred Million which shall be deemed paid for by the Government with the net
asset values of the Bank remaining after the transfer of assets and liabilities as
provided in Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their special
charters are the Philippine Crop Insurance Corporation, 42 Philippine International Trading
Corporation,43 and the Philippine National Bank 44 before it was reorganized as a stock
corporation under the Corporation Code. All these government-owned corporations organized
under special charters as stock corporations are subject to real estate tax on real properties
owned by them. To rule that they are not government-owned or controlled corporations
because they are not registered with the Securities and Exchange Commission would remove
them from the reach of Section 234 of the Local Government Code, thus exempting them from
real estate tax.
Third, the government-owned or controlled corporations created through special charters are
those that meet the two conditions prescribed in Section 16, Article XII of the Constitution.
The first condition is that the government-owned or controlled corporation must be established
for the common good. The second condition is that the government-owned or controlled
corporation must meet the test of economic viability. Section 16, Article XII of the 1987
Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the
common good and subject to the test of economic viability. (Emphasis and
underscoring supplied)
The Constitution expressly authorizes the legislature to create "government-owned or
controlled corporations" through special charters only if these entities are required to meet the
twin conditions of common good and economic viability. In other words, Congress has no
power to create government-owned or controlled corporations with special charters unless they
are made to comply with the two conditions of common good and economic viability. The test
of economic viability applies only to government-owned or controlled corporations that
perform economic or commercial activities and need to compete in the market place. Being
essentially economic vehicles of the State for the common good — meaning for economic
development purposes — these government-owned or controlled corporations with special
charters are usually organized as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing
governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations. These
instrumentalities are not the "government-owned or controlled corporations" referred to in
Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or
public functions. Congress has plenary authority to create government instrumentalities vested
with corporate powers provided these instrumentalities perform essential government
functions or public services. However, when the legislature creates through special charters
corporations that perform economic or commercial activities, such entities — known as
"government-owned or controlled corporations" — must meet the test of economic viability
because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the
Philippines and similar government-owned or controlled corporations, which derive their
income to meet operating expenses solely from commercial transactions in competition with
the private sector. The intent of the Constitution is to prevent the creation of government-
owned or controlled corporations that cannot survive on their own in the market place and thus
merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:
29
 MR. OPLE: Madam President, the reason for this concern is really that when the
government creates a corporation, there is a sense in which this corporation becomes
exempt from the test of economic performance. We know what happened in the past.
If a government corporation loses, then it makes its claim upon the taxpayers' money
through new equity infusions from the government and what is always invoked is
the common good. That is the reason why this year, out of a budget of P115 billion
for the entire government, about P28 billion of this will go into equity infusions to
support a few government financial institutions. And this is all taxpayers' money
which could have been relocated to agrarian reform, to social services like health
and education, to augment the salaries of grossly underpaid public employees. And
yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the
"common good," this becomes a restraint on future enthusiasts for state capitalism to
excuse themselves from the responsibility of meeting the market test so that they
become viable. And so, Madam President, I reiterate, for the committee's
consideration and I am glad that I am joined in this proposal by Commissioner Foz,
the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC
TEST," together with the common good.45
Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his
textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The
significant addition, however, is the phrase "in the interest of the common good and
subject to the test of economic viability." The addition includes the ideas that they
must show capacity to function efficiently in business and that they should not go
into activities which the private sector can do better. Moreover, economic viability is
more than financial viability but also includes capability to make profit and generate
benefits not quantifiable in financial terms. 46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with
corporate powers and performing essential public services. The State is obligated to render
essential public services regardless of the economic viability of providing such service. The
non-economic viability of rendering such essential public service does not excuse the State
from withholding such essential services from the public.
However, government-owned or controlled corporations with special charters, organized
essentially for economic or commercial objectives, must meet the test of economic viability.
These are the government-owned or controlled corporations that are usually organized under
their special charters as stock corporations, like the Land Bank of the Philippines and the
Development Bank of the Philippines. These are the government-owned or controlled
corporations, along with government-owned or controlled corporations organized under the
Corporation Code, that fall under the definition of "government-owned or controlled
corporations" in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create
MIAA to compete in the market place. MIAA does not compete in the market place because
there is no competing international airport operated by the private sector. MIAA performs an
essential public service as the primary domestic and international airport of the Philippines.
The operation of an international airport requires the presence of personnel from the following
government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and
departure of passengers, screening out those without visas or travel documents, or
those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited
importations;
3. The quarantine office of the Department of Health, to enforce health measures
against the spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant
and animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the
entry of terrorists and the escape of criminals, as well as to secure the airport
premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications,
to authorize aircraft to enter or leave Philippine airspace, as well as to land on, or
take off from, the airport; and
7. The MIAA, to provide the proper premises — such as runway and buildings —
for the government personnel, passengers, and airlines, and to manage the airport
operations.
All these agencies of government perform government functions essential to the operation of
an international airport.
MIAA performs an essential public service that every modern State must provide its citizens.
MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes
on passengers and airlines. The terminal fees that MIAA charges every passenger are
regulatory or administrative fees47 and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code, which provides:
SEC. 2. General Terms Defined. – x x x x
30
 (10) Instrumentality refers to any agency of the National Government, not integrated
within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds,
and enjoying operational autonomy, usually through a charter. x x x (Emphasis
supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a
government-owned or controlled corporation. Without a change in its capital structure, MIAA
remains a government instrumentality under Section 2(10) of the Introductory Provisions of
the Administrative Code. More importantly, as long as MIAA renders essential public
services, it need not comply with the test of economic viability. Thus, MIAA is outside the
scope of the phrase "government-owned or controlled corporations" under Section 16, Article
XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-
owned or controlled corporation" as merely "clarificatory or illustrative." This is fatal. The
1987 Constitution prescribes explicit conditions for the creation of "government-owned or
controlled corporations." The Administrative Code defines what constitutes a "government-
owned or controlled corporation." To belittle this phrase as "clarificatory or illustrative" is
grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section
2(13) of the Introductory Provisions of the Administrative Code because it is not organized as
a stock or non-stock corporation. Neither is MIAA a government-owned or controlled
corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not
required to meet the test of economic viability. MIAA is a government instrumentality vested
with corporate powers and performing essential public services pursuant to Section 2(10) of
the Introductory Provisions of the Administrative Code. As a government instrumentality,
MIAA is not subject to any kind of tax by local governments under Section 133(o) of the
Local Government Code. The exception to the exemption in Section 234(a) does not apply to
MIAA because MIAA is not a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property owned by the Republic is given to
a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and
thus are properties of public dominion. Properties of public dominion are owned by the State
or the Republic. 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. (Emphasis
supplied)
The term "ports x x x constructed by the State" includes airports and seaports. The Airport
Lands and Buildings of MIAA are intended for public use, and at the very least intended for
public service. Whether intended for public use or public service, the Airport Lands and
Buildings are properties of public dominion. As properties of public dominion, the Airport
Lands and Buildings are owned by the Republic and thus exempt from real estate tax under
Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code,
which governs the legal relation and status of government units, agencies and offices within
the entire government machinery, MIAA is a government instrumentality and not a
government-owned or controlled corporation. Under Section 133(o) of the Local Government
Code, MIAA as a government instrumentality is not a taxable person because it is not subject
to "[t]axes, fees or charges of any kind" by local governments. The only exception is when
MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local
Government Code, in which case the specific real property leased becomes subject to real
estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons
like private parties are subject to real estate tax by the City of Parañaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted
to public use, are properties of public dominion and thus owned by the State or the Republic of
the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which
includes public airports and seaports, as properties of public dominion and owned by the
Republic. As properties of public dominion owned by the Republic, there is no doubt
whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax
under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that
properties of public dominion are not subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the
Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We
DECLARE the Airport Lands and Buildings of the Manila International Airport Authority
EXEMPT from the real estate tax imposed by the City of Parañaque. We declare VOID all
the real estate tax assessments, including the final notices of real estate tax delinquencies,
issued by the City of Parañaque on the Airport Lands and Buildings of the Manila
International Airport Authority, except for the portions that the Manila International Airport
Authority has leased to private parties. We also declare VOID the assailed auction sale, and all
its effects, of the Airport Lands and Buildings of the Manila International Airport Authority.
No costs.
SO ORDERED.
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