Classification of Property Full Text Cases

CASES PROPERTY CLASS 1415
CLASSIFICATION OF PROPERTY FULL TEXT

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I.
[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T.
GOQUIOLAY, petitioners, vs. PCI LEASING AND
FINANCE, INC., respondent.
D E C I S I O N
PANGANIBAN, J .:
After agreeing to a contract stipulating that a real or immovable property
be considered as personal or movable, a party is estopped from
subsequently claiming otherwise. Hence, such property is a proper subject
of a writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6,
1999 Decision
[1]
of the Court of Appeals (CA)
[2]
in CA-GR SP No. 47332 and
its February 26, 1999 Resolution
[3]
denying reconsideration. The decretal
portion of the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated February
18, 1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-
33500 are hereby AFFIRMED. The writ of preliminary injunction issued on
June 15, 1998 is hereby LIFTED.
[4]

In its February 18, 1998 Order,
[5]
the Regional Trial Court (RTC) of
Quezon City (Branch 218)
[6]
issued a Writ of Seizure.
[7]
The March 18, 1998
Resolution
[8]
denied petitioners Motion for Special Protective Order, praying
that the deputy sheriff be enjoined from seizing immobilized or other real
properties in (petitioners) factory in Cainta, Rizal and to return to their
original place whatever immobilized machineries or equipments he may
have removed.
[9]

The Facts
The undisputed facts are summarized by the Court of Appeals as
follows:
[10]

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On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI
Leasing for short) filed with the RTC-QC a complaint for [a] sum of money
(Annex E), with an application for a writ of replevin docketed as Civil Case
No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing,
respondent judge issued a writ of replevin (Annex B) directing its sheriff to
seize and deliver the machineries and equipment to PCI Leasing after 5
days and upon the payment of the necessary expenses.
On March 24, 1998, in implementation of said writ, the sheriff proceeded
to petitioners factory, seized one machinery with [the] word that he [would]
return for the other machineries.
On March 25, 1998, petitioners filed a motion for special protective order
(Annex C), invoking the power of the court to control the conduct of its
officers and amend and control its processes, praying for a directive for the
sheriff to defer enforcement of the writ of replevin.
This motion was opposed by PCI Leasing (Annex F), on the ground that
the properties [were] still personal and therefore still subject to seizure and
a writ of replevin.
In their Reply, petitioners asserted that the properties sought to be seized
[were] immovable as defined in Article 415 of the Civil Code, the parties
agreement to the contrary notwithstanding. They argued that to give effect
to the agreement would be prejudicial to innocent third parties. They
further stated that PCI Leasing [was] estopped from treating these
machineries as personal because the contracts in which the alleged
agreement [were] embodied [were] totally sham and farcical.
On April 6, 1998, the sheriff again sought to enforce the writ of seizure and
take possession of the remaining properties. He was able to take two
more, but was prevented by the workers from taking the rest.
On April 7, 1998, they went to [the CA] via an original action for certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the
subject machines were personal property, and that they had only been
leased, not owned, by petitioners. It also ruled that the words of the
contract are clear and leave no doubt upon the true intention of the
contracting parties. Observing that Petitioner Goquiolay was an
experienced businessman who was not unfamiliar with the ways of the
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trade, it ruled that he should have realized the import of the document he
signed. The CA further held:
Furthermore, to accord merit to this petition would be to preempt the trial
court in ruling upon the case below, since the merits of the whole matter
are laid down before us via a petition whose sole purpose is to inquire upon
the existence of a grave abuse of discretion on the part of the [RTC] in
issuing the assailed Order and Resolution. The issues raised herein are
proper subjects of a full-blown trial, necessitating presentation of evidence
by both parties. The contract is being enforced by one, and [its] validity is
attacked by the other a matter x x x which respondent court is in the best
position to determine.
Hence, this Petition.
[11]

The Issues
In their Memorandum, petitioners submit the following issues for our
consideration:
A. Whether or not the machineries purchased and imported by SERGS
became real property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease.
[12]

In the main, the Court will resolve whether the said machines are
personal, not immovable, property which may be a proper subject of a writ of
replevin. As a preliminary matter, the Court will also address briefly the
procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly
whether it was being filed under Rule 45 or Rule 65 of the Rules of Court. It
further alleges that the Petition erroneously impleaded Judge Hilario Laqui
as respondent.
There is no question that the present recourse is under Rule 45. This
conclusion finds support in the very title of the Petition, which is Petition for
Review on Certiorari.
[13]

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While Judge Laqui should not have been impleaded as a
respondent,
[14]
substantial justice requires that such lapse by itself should not
warrant the dismissal of the present Petition. In this light, the Court deems it
proper to remove, motu proprio, the name of Judge Laqui from the caption of
the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were
not proper subjects of the Writ issued by the RTC, because they were in fact
real property. Serious policy considerations, they argue, militate against a
contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued
for the recovery of personal property only.
[15]
Section 3 thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and approval of the
bond, the court shall issue an order and the corresponding writ of replevin
describing the personal property alleged to be wrongfully detained and
requiring the sheriff forthwith to take such property into his custody.
On the other hand, Article 415 of the Civil Code enumerates immovable
or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended by the
owner of the tenement for an industry or works which may be carried on in
a building or on a piece of land, and which tend directly to meet the needs
of the said industry or works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of
Seizure were placed by petitioners in the factory built on their own
land. Indisputably, they were essential and principal elements of their
chocolate-making industry. Hence, although each of them was movable or
personal property on its own, all of them have become immobilized by
destination because they are essential and principal elements in the
industry.
[16]
In that sense, petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to Article 415 (5) of the
Civil Code.
[17]

Be that as it may, we disagree with the submission of the petitioners that
the said machines are not proper subjects of the Writ of Seizure.
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The Court has held that contracting parties may validly stipulate that a
real property be considered as personal.
[18]
After agreeing to such stipulation,
they are consequently estopped from claiming otherwise. Under the
principle of estoppel, a party to a contract is ordinarily precluded from
denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,
[19]
the Court upheld the intention of the
parties to treat a house as a personal property because it had been made
the subject of a chattel mortgage. The Court ruled:
x x x. Although there is no specific statement referring to the subject
house as personal property, yet by ceding, selling or transferring a property
by way of chattel mortgage defendants-appellants could only have meant
to convey the house as chattel, or at least, intended to treat the same as
such, so that they should not now be allowed to make an inconsistent stand
by claiming otherwise.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.
Wearever Textile Mills
[20]
also held that the machinery used in a factory and
essential to the industry, as in the present case, was a proper subject of a
writ of replevin because it was treated as personal property in a
contract. Pertinent portions of the Courts ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the above
Tumalad case, may be considered as personal property for purposes of
executing a chattel mortgage thereon as long as the parties to the contract
so agree and no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in its nature and
becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped
from denying the existence of the chattel mortgage.
In the present case, the Lease Agreement clearly provides that the
machines in question are to be considered as personal
property. Specifically, Section 12.1 of the Agreement reads as follows:
[21]

12.1 The PROPERTY is, and shall at all times be and remain, personal
property notwithstanding that the PROPERTY or any part thereof may now
be, or hereafter become, in any manner affixed or attached to or embedded
in, or permanently resting upon, real property or any building thereon, or
attached in any manner to what is permanent.
Clearly then, petitioners are estopped from denying the characterization
of the subject machines as personal property. Under the circumstances,
they are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines
should be deemed personal property pursuant to the Lease Agreement is
good only insofar as the contracting parties are concerned.
[22]
Hence, while
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the parties are bound by the Agreement, third persons acting in good faith
are not affected by its stipulation characterizing the subject machinery as
personal.
[23]
In any event, there is no showing that any specific third party
would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan
and not a lease.
[24]
Submitting documents supposedly showing that they own
the subject machines, petitioners also argue in their Petition that the
Agreement suffers from intrinsic ambiguity which places in serious doubt
the intention of the parties and the validity of the lease agreement itself.
[25]
In
their Reply to respondents Comment, they further allege that the Agreement
is invalid.
[26]

These arguments are unconvincing. The validity and the nature of the
contract are the lis mota of the civil action pending before the RTC. A
resolution of these questions, therefore, is effectively a resolution of the
merits of the case. Hence, they should be threshed out in the trial, not in the
proceedings involving the issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,
[27]
the Court explained that the
policy under Rule 60 was that questions involving title to the subject property
questions which petitioners are now raising -- should be determined in
the trial. In that case, the Court noted that the remedy of defendants under
Rule 60 was either to post a counter-bond or to question the sufficiency of
the plaintiffs bond. They were not allowed, however, to invoke the title to
the subject property. The Court ruled:
In other words, the law does not allow the defendant to file a motion to
dissolve or discharge the writ of seizure (or delivery) on ground of
insufficiency of the complaint or of the grounds relied upon therefor, as in
proceedings on preliminary attachment or injunction, and thereby put at
issue the matter of the title or right of possession over the specific chattel
being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits.
[28]

Besides, these questions require a determination of facts and a
presentation of evidence, both of which have no place in a petition for
certiorari in the CA under Rule 65 or in a petition for review in this Court
under Rule 45.
[29]

Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease
Agreement, for nothing on record shows that it has been nullified or
annulled. In fact, petitioners assailed it first only in the RTC proceedings,
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which had ironically been instituted by respondent. Accordingly, it must be
presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation
[30]
is also instructive on this
point. In that case, the Deed of Chattel Mortgage, which characterized the
subject machinery as personal property, was also assailed because
respondent had allegedly been required to sign a printed form of chattel
mortgage which was in a blank form at the time of signing. The Court
rejected the argument and relied on the Deed, ruling as follows:
x x x. Moreover, even granting that the charge is true, such fact alone
does not render a contract void ab initio, but can only be a ground for
rendering said contract voidable, or annullable pursuant to Article 1390 of
the new Civil Code, by a proper action in court. There is nothing on record
to show that the mortgage has been annulled. Neither is it disclosed that
steps were taken to nullify the same. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be
seized, then its workers would be out of work and thrown into the
streets.
[31]
They also allege that the seizure would nullify all efforts to
rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the
Writ. As earlier discussed, law and jurisprudence support its
propriety. Verily, the above-mentioned consequences, if they come true,
should not be blamed on this Court, but on the petitioners for failing to avail
themselves of the remedy under Section 5 of Rule 60, which allows the filing
of a counter-bond. The provision states:
SEC. 5. Return of property. -- If the adverse party objects to the
sufficiency of the applicants bond, or of the surety or sureties thereon, he
cannot immediately require the return of the property, but if he does not so
object, he may, at any time before the delivery of the property to the
applicant, require the return thereof, by filing with the court where the action
is pending a bond executed to the applicant, in double the value of the
property as stated in the applicants affidavit for the delivery thereof to the
applicant, if such delivery be adjudged, and for the payment of such sum to
him as may be recovered against the adverse party, and by serving a copy
bond on the applicant.
WHEREFORE, the Petition is DENIED and the assailed Decision of the
Court of Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.

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II.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 155076 January 13, 2009
LUIS MARCOS P. LAUREL, Petitioner,
vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial
Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES &
PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY Respondents.
R E S O L U T I O N
YNARES-SANTIAGO, J.:
On February 27, 2006, this Courts First Division rendered judgment in
this case as follows:
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
assailed Orders of the Regional Trial Court and the Decision of the Court
of Appeals are REVERSED and SET ASIDE. The Regional Trial Court is
directed to issue an order granting the motion of the petitioner to quash
the Amended Information.
SO ORDERED.
1

By way of brief background, petitioner is one of the accused in Criminal
Case No. 99-2425, filed with the Regional Trial Court of Makati City,
Branch 150. The Amended Information charged the accused with theft
under Article 308 of the Revised Penal Code, committed as follows:
On or about September 10-19, 1999, or prior thereto in Makati City, and
within the jurisdiction of this Honorable Court, the accused, conspiring
and confederating together and all of them mutually helping and aiding
one another, with intent to gain and without the knowledge and consent
of the Philippine Long Distance Telephone (PLDT), did then and there
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willfully, unlawfully and feloniously take, steal and use the international
long distance calls belonging to PLDT by conducting International
Simple Resale (ISR), which is a method of routing and completing
international long distance calls using lines, cables, antenae, and/or air
wave frequency which connect directly to the local or domestic
exchange facilities of the country where the call is destined, effectively
stealing this business from PLDT while using its facilities in the
estimated amount of P20,370,651.92 to the damage and prejudice of
PLDT, in the said amount.
CONTRARY TO LAW.
2

Petitioner filed a "Motion to Quash (with Motion to Defer
Arraignment)," on the ground that the factual allegations in the
Amended Information do not constitute the felony of theft. The trial
court denied the Motion to Quash the Amended Information, as well
petitioners subsequent Motion for Reconsideration.
Petitioners special civil action for certiorari was dismissed by the Court
of Appeals. Thus, petitioner filed the instant petition for review with this
Court.
In the above-quoted Decision, this Court held that the Amended
Information does not contain material allegations charging petitioner
with theft of personal property since international long distance calls
and the business of providing telecommunication or telephone services
are not personal properties under Article 308 of the Revised Penal Code.
Respondent Philippine Long Distance Telephone Company (PLDT) filed
a Motion for Reconsideration with Motion to Refer the Case to the
Supreme Court En Banc. It maintains that the Amended Information
charging petitioner with theft is valid and sufficient; that it states the
names of all the accused who were specifically charged with the crime of
theft of PLDTs international calls and business of providing
telecommunication or telephone service on or about September 10 to 19,
1999 in Makati City by conducting ISR or International Simple Resale;
that it identifies the international calls and business of providing
telecommunication or telephone service of PLDT as the personal
properties which were unlawfully taken by the accused; and that it
satisfies the test of sufficiency as it enabled a person of common
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understanding to know the charge against him and the court to render
judgment properly.
PLDT further insists that the Revised Penal Code should be interpreted
in the context of the Civil Codes definition of real and personal
property. The enumeration of real properties in Article 415 of the Civil
Code is exclusive such that all those not included therein are personal
properties. Since Article 308 of the Revised Penal Code used the words
"personal property" without qualification, it follows that all "personal
properties" as understood in the context of the Civil Code, may be the
subject of theft under Article 308 of the Revised Penal Code. PLDT
alleges that the international calls and business of providing
telecommunication or telephone service are personal properties capable
of appropriation and can be objects of theft.
PLDT also argues that "taking" in relation to theft under the Revised
Penal Code does not require "asportation," the sole requisite being that
the object should be capable of "appropriation." The element of "taking"
referred to in Article 308 of the Revised Penal Code means the act of
depriving another of the possession and dominion of a movable coupled
with the intention, at the time of the "taking," of withholding it with the
character of permanency. There must be intent to appropriate, which
means to deprive the lawful owner of the thing. Thus, the term "personal
properties" under Article 308 of the Revised Penal Code is not limited to
only personal properties which are "susceptible of being severed from a
mass or larger quantity and of being transported from place to place."
PLDT likewise alleges that as early as the 1930s, international telephone
calls were in existence; hence, there is no basis for this Courts finding
that the Legislature could not have contemplated the theft of
international telephone calls and the unlawful transmission and routing
of electronic voice signals or impulses emanating from such calls by
unlawfully tampering with the telephone device as within the coverage
of the Revised Penal Code.
According to respondent, the "international phone calls" which are
"electric currents or sets of electric impulses transmitted through a
medium, and carry a pattern representing the human voice to a
receiver," are personal properties which may be subject of theft. Article
416(3) of the Civil Code deems "forces of nature" (which includes
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electricity) which are brought under the control by science, are personal
property.
In his Comment to PLDTs motion for reconsideration, petitioner Laurel
claims that a telephone call is a conversation on the phone or a
communication carried out using the telephone. It is not synonymous to
electric current or impulses. Hence, it may not be considered as personal
property susceptible of appropriation. Petitioner claims that the analogy
between generated electricity and telephone calls is misplaced. PLDT
does not produce or generate telephone calls. It only provides the
facilities or services for the transmission and switching of the calls. He
also insists that "business" is not personal property. It is not the
"business" that is protected but the "right to carry on a business." This
right is what is considered as property. Since the services of PLDT
cannot be considered as "property," the same may not be subject of theft.
The Office of the Solicitor General (OSG) agrees with respondent PLDT
that "international phone calls and the business or service of providing
international phone calls" are subsumed in the enumeration and
definition of personal property under the Civil Code hence, may be
proper subjects of theft. It noted that the cases of United States v.
Genato,
3
United States v. Carlos
4
and United States v. Tambunting,
5
which
recognized intangible properties like gas and electricity as personal
properties, are deemed incorporated in our penal laws. Moreover, the
theft provision in the Revised Penal Code was deliberately couched in
broad terms precisely to be all-encompassing and embracing even such
scenario that could not have been easily anticipated.
According to the OSG, prosecution under Republic Act (RA) No. 8484 or
the Access Device Regulations Act of 1998 and RA 8792 or the Electronic
Commerce Act of 2000 does not preclude prosecution under the Revised
Penal Code for the crime of theft. The latter embraces unauthorized
appropriation or use of PLDTs international calls, service and business,
for personal profit or gain, to the prejudice of PLDT as owner thereof.
On the other hand, the special laws punish the surreptitious and
advanced technical means employed to illegally obtain the subject
service and business. Even assuming that the correct indictment should
have been under RA 8484, the quashal of the information would still not
be proper. The charge of theft as alleged in the Information should be
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taken in relation to RA 8484 because it is the elements, and not the
designation of the crime, that control.
Considering the gravity and complexity of the novel questions of law
involved in this case, the Special First Division resolved to refer the same
to the Banc.
We resolve to grant the Motion for Reconsideration but remand the case
to the trial court for proper clarification of the Amended Information.
Article 308 of the Revised Penal Code provides:
Art. 308. Who are liable for theft. Theft is committed by any person
who, with intent to gain but without violence against, or intimidation of
persons nor force upon things, shall take personal property of another
without the latters consent.
The elements of theft under Article 308 of the Revised Penal Code are as
follows: (1) that there be taking of personal property; (2) that said
property belongs to another; (3) that the taking be done with intent to
gain; (4) that the taking be done without the consent of the owner; and
(5) that the taking be accomplished without the use of violence against
or intimidation of persons or force upon things.
Prior to the passage of the Revised Penal Code on December 8, 1930, the
definition of the term "personal property" in the penal code provision on
theft had been established in Philippine jurisprudence. This Court, in
United States v. Genato, United States v. Carlos, and United States v.
Tambunting, consistently ruled that any personal property, tangible or
intangible, corporeal or incorporeal, capable of appropriation can be the
object of theft.
Moreover, since the passage of the Revised Penal Code on December 8,
1930, the term "personal property" has had a generally accepted
definition in civil law. In Article 335 of the Civil Code of Spain, "personal
property" is defined as "anything susceptible of appropriation and not
included in the foregoing chapter (not real property)." Thus, the term
"personal property" in the Revised Penal Code should be interpreted in
the context of the Civil Code provisions in accordance with the rule on
statutory construction that where words have been long used in a
technical sense and have been judicially construed to have a certain
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meaning, and have been adopted by the legislature as having a certain
meaning prior to a particular statute, in which they are used, the words
used in such statute should be construed according to the sense in which
they have been previously used.
6
In fact, this Court used the Civil Code
definition of "personal property" in interpreting the theft provision of
the penal code in United States v. Carlos.
Cognizant of the definition given by jurisprudence and the Civil Code of
Spain to the term "personal property" at the time the old Penal Code was
being revised, still the legislature did not limit or qualify the definition
of "personal property" in the Revised Penal Code. Neither did it provide
a restrictive definition or an exclusive enumeration of "personal
property" in the Revised Penal Code, thereby showing its intent to retain
for the term an extensive and unqualified
interpretation.1avvphi1.zw+ Consequently, any property which is not
included in the enumeration of real properties under the Civil Code and
capable of appropriation can be the subject of theft under the Revised
Penal Code.
The only requirement for a personal property to be the object of theft
under the penal code is that it be capable of appropriation. It need not be
capable of "asportation," which is defined as "carrying
away."
7
Jurisprudence is settled that to "take" under the theft provision
of the penal code does not require asportation or carrying away.
8

To appropriate means to deprive the lawful owner of the thing.
9
The
word "take" in the Revised Penal Code includes any act intended to
transfer possession which, as held in the assailed Decision, may be
committed through the use of the offenders own hands, as well as any
mechanical device, such as an access device or card as in the instant case.
This includes controlling the destination of the property stolen to
deprive the owner of the property, such as the use of a meter tampering,
as held in Natividad v. Court of Appeals,
10
use of a device to
fraudulently obtain gas, as held in United States v. Tambunting, and the
use of a jumper to divert electricity, as held in the cases of United States
v. Genato, United States v. Carlos, and United States v. Menagas.
11

As illustrated in the above cases, appropriation of forces of nature which
are brought under control by science such as electrical energy can be
achieved by tampering with any apparatus used for generating or
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measuring such forces of nature, wrongfully redirecting such forces of
nature from such apparatus, or using any device to fraudulently obtain
such forces of nature. In the instant case, petitioner was charged with
engaging in International Simple Resale (ISR) or the unauthorized
routing and completing of international long distance calls using lines,
cables, antennae, and/or air wave frequency and connecting these calls
directly to the local or domestic exchange facilities of the country where
destined.
As early as 1910, the Court declared in Genato that ownership over
electricity (which an international long distance call consists of), as well
as telephone service, is protected by the provisions on theft of the Penal
Code. The pertinent provision of the Revised Ordinance of the City of
Manila, which was involved in the said case, reads as follows:
Injury to electric apparatus; Tapping current; Evidence. No person
shall destroy, mutilate, deface, or otherwise injure or tamper with any
wire, meter, or other apparatus installed or used for generating,
containing, conducting, or measuring electricity, telegraph or telephone
service, nor tap or otherwise wrongfully deflect or take any electric
current from such wire, meter, or other apparatus.
No person shall, for any purpose whatsoever, use or enjoy the benefits
of any device by means of which he may fraudulently obtain any current
of electricity or any telegraph or telephone service; and the existence in
any building premises of any such device shall, in the absence of
satisfactory explanation, be deemed sufficient evidence of such use by
the persons benefiting thereby.
It was further ruled that even without the above ordinance the acts of
subtraction punished therein are covered by the provisions on theft of
the Penal Code then in force, thus:
Even without them (ordinance), the right of the ownership of electric
current is secured by articles 517 and 518 of the Penal Code; the
application of these articles in cases of subtraction of gas, a fluid used for
lighting, and in some respects resembling electricity, is confirmed by the
rule laid down in the decisions of the supreme court of Spain of January
20, 1887, and April 1, 1897, construing and enforcing the provisions of
articles 530 and 531 of the Penal Code of that country, articles 517 and
518 of the code in force in these islands.
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5

The acts of "subtraction" include: (a) tampering with any wire, meter, or
other apparatus installed or used for generating, containing, conducting,
or measuring electricity, telegraph or telephone service; (b) tapping or
otherwise wrongfully deflecting or taking any electric current from such
wire, meter, or other apparatus; and (c) using or enjoying the benefits of
any device by means of which one may fraudulently obtain any current
of electricity or any telegraph or telephone service.
In the instant case, the act of conducting ISR operations by illegally
connecting various equipment or apparatus to private respondent
PLDTs telephone system, through which petitioner is able to resell or
re-route international long distance calls using respondent PLDTs
facilities constitutes all three acts of subtraction mentioned above.
The business of providing telecommunication or telephone service is
likewise personal property which can be the object of theft under Article
308 of the Revised Penal Code. Business may be appropriated under
Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of
theft:
Section 2. Any sale, transfer, mortgage, or assignment of a stock of
goods, wares, merchandise, provisions, or materials otherwise than in
the ordinary course of trade and the regular prosecution of the business
of the vendor, mortgagor, transferor, or assignor, or any sale, transfer,
mortgage, or assignment of all, or substantially all, of the business or
trade theretofore conducted by the vendor, mortgagor, transferor or
assignor, or all, or substantially all, of the fixtures and equipment used
in and about the business of the vendor, mortgagor, transferor, or
assignor, shall be deemed to be a sale and transfer in bulk, in
contemplation of the Act. x x x.
In Strochecker v. Ramirez,
12
this Court stated:
With regard to the nature of the property thus mortgaged which is one-
half interest in the business above described, such interest is a personal
property capable of appropriation and not included in the enumeration
of real properties in article 335 of the Civil Code, and may be the subject
of mortgage.
Interest in business was not specifically enumerated as personal
property in the Civil Code in force at the time the above decision was
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rendered. Yet, interest in business was declared to be personal property
since it is capable of appropriation and not included in the enumeration
of real properties. Article 414 of the Civil Code provides that all things
which are or may be the object of appropriation are considered either
real property or personal property. Business is likewise not enumerated
as personal property under the Civil Code. Just like interest in business,
however, it may be appropriated. Following the ruling in Strochecker v.
Ramirez, business should also be classified as personal property. Since it
is not included in the exclusive enumeration of real properties under
Article 415, it is therefore personal property.
13

As can be clearly gleaned from the above disquisitions, petitioners acts
constitute theft of respondent PLDTs business and service, committed
by means of the unlawful use of the latters facilities. In this regard, the
Amended Information inaccurately describes the offense by making it
appear that what petitioner took were the international long distance
telephone calls, rather than respondent PLDTs business.
A perusal of the records of this case readily reveals that petitioner and
respondent PLDT extensively discussed the issue of ownership of
telephone calls. The prosecution has taken the position that said
telephone calls belong to respondent PLDT. This is evident from its
Comment where it defined the issue of this case as whether or not "the
unauthorized use or appropriation of PLDT international telephone
calls, service and facilities, for the purpose of generating personal profit
or gain that should have otherwise belonged to PLDT, constitutes
theft."
14

In discussing the issue of ownership, petitioner and respondent PLDT
gave their respective explanations on how a telephone call is
generated.
15
For its part, respondent PLDT explains the process of
generating a telephone call as follows:
38. The role of telecommunication companies is not limited to merely
providing the medium (i.e. the electric current) through which the
human voice/voice signal of the caller is transmitted. Before the human
voice/voice signal can be so transmitted, a telecommunication company,
using its facilities, must first break down or decode the human
voice/voice signal into electronic impulses and subject the same to
further augmentation and enhancements. Only after such process of
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conversion will the resulting electronic impulses be transmitted by a
telecommunication company, again, through the use of its facilities.
Upon reaching the destination of the call, the telecommunication
company will again break down or decode the electronic impulses back
to human voice/voice signal before the called party receives the same. In
other words, a telecommunication company both converts/reconverts
the human voice/voice signal and provides the medium for transmitting
the same.
39. Moreover, in the case of an international telephone call, once the
electronic impulses originating from a foreign telecommunication
company country (i.e. Japan) reaches the Philippines through a local
telecommunication company (i.e. private respondent PLDT), it is the
latter which decodes, augments and enhances the electronic impulses
back to the human voice/voice signal and provides the medium (i.e.
electric current) to enable the called party to receive the call. Thus, it is
not true that the foreign telecommunication company provides (1) the
electric current which transmits the human voice/voice signal of the
caller and (2) the electric current for the called party to receive said
human voice/voice signal.
40. Thus, contrary to petitioner Laurels assertion, once the electronic
impulses or electric current originating from a foreign
telecommunication company (i.e. Japan) reaches private respondent
PLDTs network, it is private respondent PLDT which decodes,
augments and enhances the electronic impulses back to the human
voice/voice signal and provides the medium (i.e. electric current) to
enable the called party to receive the call. Without private respondent
PLDTs network, the human voice/voice signal of the calling party will
never reach the called party.
16

In the assailed Decision, it was conceded that in making the
international phone calls, the human voice is converted into electrical
impulses or electric current which are transmitted to the party called. A
telephone call, therefore, is electrical energy. It was also held in the
assailed Decision that intangible property such as electrical energy is
capable of appropriation because it may be taken and carried away.
Electricity is personal property under Article 416 (3) of the Civil Code,
which enumerates "forces of nature which are brought under control by
science."
17

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Indeed, while it may be conceded that "international long distance calls,"
the matter alleged to be stolen in the instant case, take the form of
electrical energy, it cannot be said that such international long distance
calls were personal properties belonging to PLDT since the latter could
not have acquired ownership over such calls. PLDT merely encodes,
augments, enhances, decodes and transmits said calls using its complex
communications infrastructure and facilities. PLDT not being the owner
of said telephone calls, then it could not validly claim that such
telephone calls were taken without its consent. It is the use of these
communications facilities without the consent of PLDT that constitutes
the crime of theft, which is the unlawful taking of the telephone services
and business.
Therefore, the business of providing telecommunication and the
telephone service are personal property under Article 308 of the Revised
Penal Code, and the act of engaging in ISR is an act of "subtraction"
penalized under said article. However, the Amended Information
describes the thing taken as, "international long distance calls," and only
later mentions "stealing the business from PLDT" as the manner by
which the gain was derived by the accused. In order to correct this
inaccuracy of description, this case must be remanded to the trial court
and the prosecution directed to amend the Amended Information, to
clearly state that the property subject of the theft are the services and
business of respondent PLDT. Parenthetically, this amendment is not
necessitated by a mistake in charging the proper offense, which would
have called for the dismissal of the information under Rule 110, Section
14 and Rule 119, Section 19 of the Revised Rules on Criminal Procedure.
To be sure, the crime is properly designated as one of theft. The purpose
of the amendment is simply to ensure that the accused is fully and
sufficiently apprised of the nature and cause of the charge against him,
and thus guaranteed of his rights under the Constitution.
ACCORDINGLY, the motion for reconsideration is GRANTED. The
assailed Decision dated February 27, 2006 is RECONSIDERED and SET
ASIDE. The Decision of the Court of Appeals in CA-G.R. SP No. 68841
affirming the Order issued by Judge Zeus C. Abrogar of the Regional
Trial Court of Makati City, Branch 150, which denied the Motion to
Quash (With Motion to Defer Arraignment) in Criminal Case No. 99-
2425 for theft, is AFFIRMED. The case is remanded to the trial court and
the Public Prosecutor of Makati City is hereby DIRECTED to amend the
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Amended Information to show that the property subject of the theft
were services and business of the private offended party.
SO ORDERED.

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III.
THIRD DIVISION
[G.R. NO. 168557 : February 16, 2007]
FELS ENERGY, INC., Petitioner, v. THE PROVINCE OF BATANGAS
and THE OFFICE OF THE PROVINCIAL ASSESSOR OF
BATANGAS, Respondents.
[G.R. NO. 170628 : February 16, 2007]
NATIONAL POWER CORPORATION, Petitioner, v. LOCAL BOARD
OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA,
in his capacity as the Assessor of the Province of Batangas, and the
PROVINCE OF BATANGAS represented by its Provincial
Assessor,Respondents.
D E C I S I O N
CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and
G.R. No. 170628, which were filed by petitioners FELS Energy, Inc.
(FELS) and National Power Corporation (NPC), respectively. The first is
a Petition for Review on Certiorari assailing the August 25, 2004
Decision
1
of the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its
Resolution
2
dated June 20, 2005; the second, also a Petition for Review
on Certiorari, challenges the February 9, 2005 Decision
3
and November
23, 2005 Resolution
4
of the CA in CA-G.R. SP No. 67491. Both petitions
were dismissed on the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with Polar
Energy, Inc. over 3x30 MW diesel engine power barges moored at
Balayan Bay in Calaca, Batangas. The contract, denominated as an
Energy Conversion Agreement
5
(Agreement), was for a period of five
years. Article 10 reads:
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10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment
of (a) all taxes, import duties, fees, charges and other levies imposed by
the National Government of the Republic of the Philippines or any
agency or instrumentality thereof to which POLAR may be or become
subject to or in relation to the performance of their obligations under this
agreement (other than (i) taxes imposed or calculated on the basis of the
net income of POLAR and Personal Income Taxes of its employees and
(ii) construction permit fees, environmental permit fees and other similar
fees and charges) and (b) all real estate taxes and assessments, rates and
other charges in respect of the Power Barges.
6

Subsequently, Polar Energy, Inc. assigned its rights under the
Agreement to FELS. The NPC initially opposed the assignment of rights,
citing paragraph 17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an assessment of real property taxes
on the power barges from Provincial Assessor Lauro C. Andaya of
Batangas City. The assessed tax, which likewise covered those due for
1994, amounted to P56,184,088.40 per annum. FELS referred the matter
to NPC, reminding it of its obligation under the Agreement to pay all
real estate taxes. It then gave NPC the full power and authority to
represent it in any conference regarding the real property assessment of
the Provincial Assessor.
In a letter
7
dated September 7, 1995, NPC sought reconsideration of the
Provincial Assessor's decision to assess real property taxes on the power
barges. However, the motion was denied on September 22, 1995, and the
Provincial Assessor advised NPC to pay the assessment.
8
This prompted
NPC to file a petition with the Local Board of Assessment Appeals
(LBAA) for the setting aside of the assessment and the declaration of the
barges as non-taxable items; it also prayed that should LBAA find the
barges to be taxable, the Provincial Assessor be directed to make the
necessary corrections.
9

In its Answer to the petition, the Provincial Assessor averred that the
barges were real property for purposes of taxation under Section 199(c)
of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation,
informing the LBAA that the Department of Finance (DOF) had
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rendered an opinion
10
dated May 20, 1996, where it is clearly stated that
power barges are not real property subject to real property assessment.
On August 26, 1996, the LBAA rendered a Resolution
11
denying the
petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay
the real estate tax in the amount of P56,184,088.40, for the year 1994.
SO ORDERED.
12

The LBAA ruled that the power plant facilities, while they may be
classified as movable or personal property, are nevertheless considered
real property for taxation purposes because they are installed at a
specific location with a character of permanency. The LBAA also pointed
out that the owner of the barges'FELS, a private corporation is the one
being taxed, not NPC. A mere agreement making NPC responsible for
the payment of all real estate taxes and assessments will not justify the
exemption of FELS; such a privilege can only be granted to NPC and
cannot be extended to FELS. Finally, the LBAA also ruled that the
petition was filed out of time.
Aggrieved, FELS appealed the LBAA's ruling to the Central Board of
Assessment Appeals (CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a
Notice of Levy and Warrant by Distraint
13
over the power barges,
seeking to collect real property taxes amounting toP232,602,125.91 as of
July 31, 1996. The notice and warrant was officially served to FELS on
November 8, 1996. It then filed a Motion to Lift Levy dated November
14, 1996, praying that the Provincial Assessor be further restrained by
the CBAA from enforcing the disputed assessment during the pendency
of the appeal.
On November 15, 1996, the CBAA issued an Order
14
lifting the levy and
distraint on the properties of FELS in order not to preempt and render
ineffectual, nugatory and illusory any resolution or judgment which the
Board would issue.
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Meantime, the NPC filed a Motion for Intervention
15
dated August 7,
1998 in the proceedings before the CBAA. This was approved by the
CBAA in an Order
16
dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several
motions to admit bond to guarantee the payment of real property taxes
assessed by the Provincial Assessor (in the event that the judgment be
unfavorable to them). The bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision
17
finding the power
barges exempt from real property tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment Appeals
of the Province of Batangas is hereby reversed. Respondent-appellee
Provincial Assessor of the Province of Batangas is hereby ordered to
drop subject property under ARP/Tax Declaration No. 018-00958 from
the List of Taxable Properties in the Assessment Roll. The Provincial
Treasurer of Batangas is hereby directed to act accordingly.
SO ORDERED.
18

Ruling in favor of FELS and NPC, the CBAA reasoned that the power
barges belong to NPC; since they are actually, directly and exclusively
used by it, the power barges are covered by the exemptions under
Section 234(c) of R.A. No. 7160.
19
As to the other jurisdictional issue, the
CBAA ruled that prescription did not preclude the NPC from pursuing
its claim for tax exemption in accordance with Section 206 of R.A. No.
7160. The Provincial Assessor filed a motion for reconsideration, which
was opposed by FELS and NPC.
In a complete volte face, the CBAA issued a Resolution
20
on July 31, 2001
reversing its earlier decision. The fallo of the resolution reads:
WHEREFORE, premises considered, it is the resolution of this Board
that:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is
dismissed.
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(c) The resolution of the Local Board of Assessment Appeals of Batangas
is hereby affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor
of Batangas is likewise hereby affirmed.
SO ORDERED.
21

FELS and NPC filed separate motions for reconsideration, which were
timely opposed by the Provincial Assessor. The CBAA denied the said
motions in a Resolution
22
dated October 19, 2001.
Dissatisfied, FELS filed a Petition for Review before the CA docketed as
CA-G.R. SP No. 67490. Meanwhile, NPC filed a separate petition,
docketed as CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for
Consolidation in CA-G.R. SP No. 67490 praying for the consolidation of
its petition with CA-G.R. SP No. 67491. In a Resolution
23
dated February
12, 2002, the appellate court directed NPC to re-file its motion for
consolidation with CA-G.R. SP No. 67491, since it is the ponente of the
latter petition who should resolve the request for reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004,
the Twelfth Division of the appellate court rendered judgment in CA-
G.R. SP No. 67490 denying the petition on the ground of prescription.
The decretal portion of the decision reads:
WHEREFORE, the Petition for Review is DENIED for lack of merit and
the assailed Resolutions dated July 31, 2001 and October 19, 2001 of the
Central Board of Assessment Appeals are AFFIRMED.
SO ORDERED.
24

On September 20, 2004, FELS timely filed a motion for reconsideration
seeking the reversal of the appellate court's decision in CA-G.R. SP No.
67490.
Thereafter, NPC filed a Petition for Review dated October 19, 2004
before this Court, docketed as G.R. No. 165113, assailing the appellate
court's decision in CA-G.R. SP No. 67490. The petition was, however,
denied in this Court's Resolution
25
of November 8, 2004, for NPC's
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failure to sufficiently show that the CA committed any reversible error
in the challenged decision. NPC filed a motion for reconsideration,
which the Court denied with finality in a Resolution
26
dated January 19,
2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No.
67491. It held that the right to question the assessment of the Provincial
Assessor had already prescribed upon the failure of FELS to appeal the
disputed assessment to the LBAA within the period prescribed by law.
Since FELS had lost the right to question the assessment, the right of the
Provincial Government to collect the tax was already absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking
reconsideration of the February 5, 2005 ruling of the CA in CA-G.R. SP
No. 67491. The motion was denied in a Resolution
27
dated November 23,
2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490
had been earlier denied for lack of merit in a Resolution
28
dated June 20,
2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557
before this Court, raising the following issues:
A.
Whether power barges, which are floating and movable, are personal
properties and therefore, not subject to real property tax.
B.
Assuming that the subject power barges are real properties, whether
they are exempt from real estate tax under Section 234 of the Local
Government Code ("LGC").
C.
Assuming arguendo that the subject power barges are subject to real
estate tax, whether or not it should be NPC which should be made to
pay the same under the law.
D.
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Assuming arguendo that the subject power barges are real properties,
whether or not the same is subject to depreciation just like any other
personal properties.
E.
Whether the right of the petitioner to question the patently null and void
real property tax assessment on the petitioner's personal properties is
imprescriptible.
29

On January 13, 2006, NPC filed its own Petition for Review before this
Court (G.R. No. 170628), indicating the following errors committed by
the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE APPEAL TO THE LBAA WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING
THAT THE POWER BARGES ARE NOT SUBJECT TO REAL
PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING
THAT THE ASSESSMENT ON THE POWER BARGES WAS NOT
MADE IN ACCORDANCE WITH LAW.
30

Considering that the factual antecedents of both cases are similar, the
Court ordered the consolidation of the two cases in a Resolution
31
dated
March 8, 2006.rbl r l l lbrr
In an earlier Resolution dated February 1, 2006, the Court had required
the parties to submit their respective Memoranda within 30 days from
notice. Almost a year passed but the parties had not submitted their
respective memoranda. Considering that taxes'the lifeblood of our
economy are involved in the present controversy, the Court was
prompted to dispense with the said pleadings, with the end view of
advancing the interests of justice and avoiding further delay.
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In both petitions, FELS and NPC maintain that the appeal before the
LBAA was not time-barred. FELS argues that when NPC moved to have
the assessment reconsidered on September 7, 1995, the running of the
period to file an appeal with the LBAA was tolled. For its part, NPC
posits that the 60-day period for appealing to the LBAA should be
reckoned from its receipt of the denial of its motion for reconsideration.
Petitioners' contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government
Code of 1991, provides:
SECTION 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.
We note that the notice of assessment which the Provincial Assessor sent
to FELS on August 7, 1995, contained the following statement:
If you are not satisfied with this assessment, you may, within sixty (60)
days from the date of receipt hereof, appeal to the Board of Assessment
Appeals of the province by filing a petition under oath on the form
prescribed for the purpose, together with copies of ARP/Tax
Declaration and such affidavits or documents submitted in support of
the appeal.
32

Instead of appealing to the Board of Assessment Appeals (as stated in
the notice), NPC opted to file a motion for reconsideration of the
Provincial Assessor's decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling
or action of the provincial, city or municipal assessor in the assessment
of the property. It follows then that the determination made by the
respondent Provincial Assessor with regard to the taxability of the
subject real properties falls within its power to assess properties for
taxation purposes subject to appeal before the LBAA.
33

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We fully agree with the rationalization of the CA in both CA-G.R. SP
No. 67490 and CA-G.R. SP No. 67491. The two divisions of the appellate
court cited the case of Callanta v. Office of the Ombudsman,
34
where we
ruled that under Section 226 of R.A. No 7160,
35
the last action of the local
assessor on a particular assessment shall be the notice of assessment; it is
this last action which gives the owner of the property the right to appeal
to the LBAA. The procedure likewise does not permit the property
owner the remedy of filing a motion for reconsideration before the local
assessor. The pertinent holding of the Court in Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should
have brought their appeals before the LBAA. Unfortunately, despite the
advice to this effect contained in their respective notices of assessment,
the owners chose to bring their requests for a review/readjustment
before the city assessor, a remedy not sanctioned by the law. To allow
this procedure would indeed invite corruption in the system of appraisal
and assessment. It conveniently courts a graft-prone situation where
values of real property may be initially set unreasonably high, and then
subsequently reduced upon the request of a property owner. In the latter
instance, allusions of a possible covert, illicit trade-off cannot be
avoided, and in fact can conveniently take place. Such occasion for
mischief must be prevented and excised from our system.
36

For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor
sends a notice to the owner or lawful possessor of real property of its
revised assessed value, the former shall no longer have any jurisdiction
to entertain any request for a review or readjustment. The appropriate
forum where the aggrieved party may bring his appeal is the LBAA as
provided by law. It follows ineluctably that the 60-day period for
making the appeal to the LBAA runs without interruption. This is what
We held in SP 67490 and reaffirm today in SP 67491.
37

To reiterate, if the taxpayer fails to appeal in due course, the right of the
local government to collect the taxes due with respect to the taxpayer's
property becomes absolute upon the expiration of the period to
appeal.
38
It also bears stressing that the taxpayer's failure to question the
assessment in the LBAA renders the assessment of the local assessor
final, executory and demandable, thus, precluding the taxpayer from
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questioning the correctness of the assessment, or from invoking any
defense that would reopen the question of its liability on the merits.
39

In fine, the LBAA acted correctly when it dismissed the petitioners'
appeal for having been filed out of time; the CBAA and the appellate
court were likewise correct in affirming the dismissal. Elementary is the
rule that the perfection of an appeal within the period therefor is both
mandatory and jurisdictional, and failure in this regard renders the
decision final and executory.
40

In the Comment filed by the Provincial Assessor, it is asserted that the
instant petition is barred byres judicata; that the final and executory
judgment in G.R. No. 165113 (where there was a final determination on
the issue of prescription), effectively precludes the claims herein; and
that the filing of the instant petition after an adverse judgment in G.R.
No. 165113 constitutes forum shopping.
FELS maintains that the argument of the Provincial Assessor is
completely misplaced since it was not a party to the erroneous petition
which the NPC filed in G.R. No. 165113. It avers that it did not
participate in the aforesaid proceeding, and the Supreme Court never
acquired jurisdiction over it. As to the issue of forum shopping,
petitioner claims that no forum shopping could have been committed
since the elements of litis pendentia or res judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is
founded upon two grounds embodied in various maxims of common
law, namely: (1) public policy and necessity, which makes it to the
interest of the
State that there should be an end to litigation - republicae ut sit litium;
and (2) the hardship on the individual of being vexed twice for the same
cause - nemo debet bis vexari et eadem causa. A conflicting doctrine
would subject the public peace and quiet to the will and dereliction of
individuals and prefer the regalement of the litigious disposition on the
part of suitors to the preservation of the public tranquility and
happiness.
41
As we ruled in Heirs of Trinidad De Leon Vda. de Roxas v.
Court of Appeals:
42

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x x x An existing final judgment or decree - rendered upon the merits,
without fraud or collusion, by a court of competent jurisdiction acting
upon a matter within its authority - is conclusive on the rights of the
parties and their privies. This ruling holds in all other actions or suits, in
the same or any other judicial tribunal of concurrent jurisdiction,
touching on the points or matters in issue in the first suit.
x x x
Courts will simply refuse to reopen what has been decided. They will
not allow the same parties or their privies to litigate anew a question
once it has been considered and decided with finality. Litigations must
end and terminate sometime and somewhere. The effective and efficient
administration of justice requires that once a judgment has become final,
the prevailing party should not be deprived of the fruits of the verdict
by subsequent suits on the same issues filed by the same parties.
This is in accordance with the doctrine of res judicata which has the
following elements: (1) the former judgment must be final; (2) the court
which rendered it had jurisdiction over the subject matter and the
parties; (3) the judgment must be on the merits; and (4) there must be
between the first and the second actions, identity of parties, subject
matter and causes of action. The application of the doctrine of res
judicata does not require absolute identity of parties but merely
substantial identity of parties. There is substantial identity of parties
when there is community of interest or privity of interest between a
party in the first and a party in the second case even if the first case did
not implead the latter.
43

To recall, FELS gave NPC the full power and authority to represent it in
any proceeding regarding real property assessment. Therefore, when
petitioner NPC filed its Petition for Review docketed as G.R. No. 165113,
it did so not only on its behalf but also on behalf of FELS. Moreover, the
assailed decision in the earlier Petition for Review filed in this Court was
the decision of the appellate court in CA-G.R. SP No. 67490, in which
FELS was the petitioner. Thus, the decision in G.R. No. 165116 is binding
on petitioner FELS under the principle of privity of interest. In fine,
FELS and NPC are substantially "identical parties" as to warrant the
application of res judicata. FELS's argument that it is not bound by the
erroneous petition filed by NPC is thus unavailing.
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On the issue of forum shopping, we rule for the Provincial Assessor.
Forum shopping exists when, as a result of an adverse judgment in one
forum, a party seeks another and possibly favorable judgment in
another forum other than by appeal or special civil action or certiorari .
There is also forum shopping when a party institutes two or more
actions or proceedings grounded on the same cause, on the gamble that
one or the other court would make a favorable disposition.
44

Petitioner FELS alleges that there is no forum shopping since the
elements of res judicata are not present in the cases at bar; however, as
already discussed, res judicata may be properly applied herein.
Petitioners engaged in forum shopping when they filed G.R. NOS.
168557 and 170628 after the Petition for Review in G.R. No. 165116.
Indeed, petitioners went from one court to another trying to get a
favorable decision from one of the tribunals which allowed them to
pursue their cases.
It must be stressed that an important factor in determining the existence
of forum shopping is the vexation caused to the courts and the parties-
litigants by the filing of similar cases to claim substantially the same
reliefs.
45
The rationale against forum shopping is that a party should not
be allowed to pursue simultaneous remedies in two different fora. Filing
multiple petitions or complaints constitutes abuse of court processes,
which tends to degrade the administration of justice, wreaks havoc upon
orderly judicial procedure, and adds to the congestion of the heavily
burdened dockets of the courts.
46

Thus, there is forum shopping when there exist: (a) identity of parties, or
at least such parties as represent the same interests in both actions, (b)
identity of rights asserted and relief prayed for, the relief being founded
on the same facts, and (c) the identity of the two preceding particulars is
such that any judgment rendered in the pending case, regardless of
which party is successful, would amount to res judicata in the other.
47

Having found that the elements of res judicata and forum shopping are
present in the consolidated cases, a discussion of the other issues is no
longer necessary. Nevertheless, for the peace and contentment of
petitioners, we shall shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are
real property and are thus subject to real property tax. This is also the
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inevitable conclusion, considering that G.R. No. 165113 was dismissed
for failure to sufficiently show any reversible error. Tax assessments by
tax examiners are presumed correct and made in good faith, with the
taxpayer having the burden of proving otherwise.
48
Besides, factual
findings of administrative bodies, which have acquired expertise in their
field, are generally binding and conclusive upon the Court; we will not
assume to interfere with the sensible exercise of the judgment of men
especially trained in appraising property. Where the judicial mind is left
in doubt, it is a sound policy to leave the assessment undisturbed.
49
We
find no reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of
New York, et al.,
50
a power company brought an action to review
property tax assessment. On the city's motion to dismiss, the Supreme
Court of New York held that the barges on which were mounted gas
turbine power plants designated to generate electrical power, the fuel oil
barges which supplied fuel oil to the power plant barges, and the
accessory equipment mounted on the barges were subject to real
property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks
and structures which, though floating, are intended by their nature and
object to remain at a fixed place on a river, lake, or coast" are considered
immovable property. Thus, power barges are categorized as immovable
property by destination, being in the nature of machinery and other
implements intended by the owner for an industry or work which may
be carried on in a building or on a piece of land and which tend directly
to meet the needs of said industry or work.
51

Petitioners maintain nevertheless that the power barges are exempt from
real estate tax under Section 234 (c) of R.A. No. 7160 because they are
actually, directly and exclusively used by petitioner NPC, a government
- owned and controlled corporation engaged in the supply, generation,
and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the
taxable properties is petitioner FELS, which in fine, is the entity being
taxed by the local government. As stipulated under Section 2.11, Article
2 of the Agreement:
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OWNERSHIP OF POWER BARGES. POLAR shall own the Power
Barges and all the fixtures, fittings, machinery and equipment on the Site
used in connection with the Power Barges which have been supplied by
it at its own cost. POLAR shall operate, manage and maintain the Power
Barges for the purpose of converting Fuel of NAPOCOR into
electricity.
52

It follows then that FELS cannot escape liability from the payment of
realty taxes by invoking its exemption in Section 234 (c) of R.A. No.
7160, which reads:
SECTION 234. Exemptions from Real Property Tax. - The following are
exempted from payment of the real property tax:
x x x
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or
controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power; x x x
Indeed, the law states that the machinery must be actually, directly and
exclusively used by the government owned or controlled corporation;
nevertheless, petitioner FELS still cannot find solace in this provision
because Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period,
subject to the supply of the necessary Fuel pursuant to Article 6 and to
the other provisions hereof, it will operate the Power Barges to convert
such Fuel into electricity in accordance with Part A of Article 7.
53

It is a basic rule that obligations arising from a contract have the force of
law between the parties. Not being contrary to law, morals, good
customs, public order or public policy, the parties to the contract are
bound by its terms and conditions.
54

Time and again, the Supreme Court has stated that taxation is the rule
and exemption is the exception.
55
The law does not look with favor on
tax exemptions and the entity that would seek to be thus privileged
must justify it by words too plain to be mistaken and too categorical to
be misinterpreted.
56
Thus, applying the rule of strict construction of laws
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granting tax exemptions, and the rule that doubts should be resolved in
favor of provincial corporations, we hold that FELS is considered a
taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the
Agreement, that it shall be responsible for the payment of all real estate
taxes and assessments, does not justify the exemption. The privilege
granted to petitioner NPC cannot be extended to FELS. The covenant is
between FELS and NPC and does not bind a third person not privy
thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has
seriously resulted in the local government's deprivation of revenues. The
power to tax is an incident of sovereignty and is unlimited in its
magnitude, acknowledging in its very nature no perimeter so that
security against its abuse is to be found only in the responsibility of the
legislature which imposes the tax on the constituency who are to pay for
it.
57
The right of local government units to collect taxes due must always
be upheld to avoid severe tax erosion. This consideration is consistent
with the State policy to guarantee the autonomy of local
governments
58
and the objective of the Local Government Code that
they enjoy genuine and meaningful local autonomy to empower them to
achieve their fullest development as self-reliant communities and make
them effective partners in the attainment of national goals.
59

In conclusion, we reiterate that the power to tax is the most potent
instrument to raise the needed revenues to finance and support myriad
activities of the local government units for the delivery of basic services
essential to the promotion of the general welfare and the enhancement
of peace, progress, and prosperity of the people.
60

WHEREFORE, the Petitions are DENIED and the assailed Decisions and
Resolutions AFFIRMED.
SO ORDERED.

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IV.
FIRST DIVISION

[G.R. No. 156295. September 23, 2003.]

MARCELO R. SORIANO, Petitioner, v. SPOUSES RICARDO and
ROSALINA GALIT,Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

Petitioner was issued a writ of possession in Civil Case No. 6643 1 for
Sum of Money by the Regional Trial Court of Balanga, Bataan, Branch 1.
The writ of possession was, however, nullified by the Court of Appeals
in CA-G.R. SP No. 65891 2 because it included a parcel of land which
was not among those explicitly enumerated in the Certificate of Sale
issued by the Deputy Sheriff, but on which stand the immovables
covered by the said Certificate. Petitioner contends that the sale of these
immovables necessarily encompasses the land on which they
stand.chanrob1es virtua1 1aw 1ibrary

Dissatisfied, petitioner filed the instant petition for review on certiorari.

Respondent Ricardo Galit contracted a loan from petitioner Marcelo
Soriano, in the total sum of P480,000.00, evidenced by four promissory
notes in the amount of P120,000.00 each dated August 2, 1996; 3 August
15, 1996; 4 September 4, 1996 5 and September 14, 1996. 6 This loan was
secured by a real estate mortgage over a parcel of land covered by
Original Certificate of Title No. 569. 7 After he failed to pay his
obligation, Soriano filed a complaint for sum of money against him with
the Regional Trial Court of Balanga City, Branch 1, which was docketed
as Civil Case No. 6643. 8

Respondents, the Spouses Ricardo and Rosalina Galit, failed to file their
answer. Hence, upon motion of Marcelo Soriano, the trial court declared
the spouses in default and proceeded to receive evidence for petitioner
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Soriano ex parte.

On July 7, 1997, the Regional Trial Court of Balanga City, Branch 1
rendered judgment 9 in favor of petitioner Soriano, the dispositive
portion of which reads:chanrob1es virtual 1aw library

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant ordering the latter to pay:chanrob1es virtual 1aw
library

1. the plaintiff the amount of P350,000.00 plus 12% interest to be
computed from the dates of maturity of the promissory notes until the
same are fully paid;

2. the plaintiff P20,000.00, as attorneys fees; and

3. the costs of suit.

SO ORDERED. 10

The judgment became final and executory. Accordingly, the trial court
issued a writ of execution in due course, by virtue of which, Deputy
Sheriff Renato E. Robles levied on the following real properties of the
Galit spouses:chanrob1es virtual 1aw library

1. A parcel of land covered by Original Certificate of Title No. T-569
(Homestead Patent No. 14692) situated in the Bo. of Tapulac, Orani,
Bataan. Bounded on the SW, along line 1-2 by Lot No. 3, Cad. 145;
containing an area of THIRTY FIVE THOUSAND SEVEN HUNDRED
FIFTY NINE (35,759) SQUARE METERS, more or less . . .;

2. STORE/HOUSE CONSTRUCTED on Lot No. 1103 made of strong
materials G.I. roofing situated at Centro I, Orani, Bataan, . . . containing
an area of 30 sq. meters, more or less . . . (constructed on TCT No.
T40785);

3. BODEGA constructed on Lot 1103, made of strong materials, G.I.
roofing, situated in Centro I, Orani, Bataan, . . . with a floor area of 42.75
sq. m. more or less . . . . 11

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7

At the sale of the above-enumerated properties at public auction held on
December 23, 1998, petitioner was the highest and only bidder with a
bid price of P483,000.00. Accordingly, on February 4, 1999, Deputy
Sheriff Robles issued a Certificate of Sale of Execution of Real Property,
12 which reads:chanrob1es virtual 1aw library

CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY

TO ALL WHO MAY SEE THESE PRESENTS:chanrob1es virtual 1aw
library

GREETINGS:chanrob1es virtual 1aw library

I HEREBY that (sic) by virtue of the writ of execution dated October 16,
1998, issued in the above-entitled case by the HON. BENJAMIN T.
VIANZON, ordering the Provincial Sheriff of Bataan or her authorized
Deputy Sheriff to cause to be made (sic) the sum of P350,000.00 plus 12%
interest to be computed from the date of maturity of the promissory
notes until the same are fully paid; P20,000.00 as attorneys fees plus
legal expenses in the implementation of the writ of execution, the
undersigned Deputy Sheriff sold at public auction on December 23, 1998
the rights and interests of defendants Sps. Ricardo and Rosalina Galit, to
the plaintiff Marcelo Soriano, the highest and only bidder for the
amount of FOUR HUNDRED EIGHTY THREE THOUSAND PESOS
(P483,000.00, Philippine Currency), the following real estate properties
more particularly described as follows:chanrob1es virtual 1aw library

ORIGINAL CERTIFICATE OF TITLE NO. T-569

A parcel of land (Homestead Patent No. 14692) situated in the Bo. of
Tapulac, Orani, Bataan, . . . . Bounded on the SW., along line 1-2 by Lot
No. 3, Cad. 145, containing an area of THIRTY FIVE THOUSAND
SEVEN HUNDRED FIFTY NINE (35,759) SQUARE METERS, more or
less . . .

TAX DEC. NO. PROPERTY INDEX NO. 018-09-001-02

STOREHOUSE constructed on Lot 1103, made of strong materials G.I.
roofing situated at Centro I, Orani, Bataan . . . containing an area of 30
sq. meters, more or less . . . (constructed on TCT No. 40785)
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TAX DEC. NO. 86 PROPERTY INDEX No. 018-09-001-02

BODEGA constructed on Lot 1103, made of strong materials G.I.
roofing situated in Centro I, Orani, Bataan, . . . with a floor area of 42.75
sq. m. more or less . . .

IT IS FURTHER CERTIFIED, that the aforesaid highest and lone bidder,
Marcelo Soriano, being the plaintiff did not pay to the Provincial Sheriff
of Bataan the amount of P483,000.00, the sale price of the above
described property which amount was credited to partial/full
satisfaction of the judgment embodied in the writ of execution.

The period of redemption of the above described real properties
together with all the improvements thereon will expire One (1) year
from and after the registration of this Certificate of Sale with the Register
of Deeds.

This Certificate of Sheriffs Sale is issued to the highest and lone bidder,
Marcelo Soriano, under guarantees prescribed by law.

Balanga, Bataan, February 4, 1999.

On April 23, 1999, petitioner caused the registration of the "Certificate of
Sale on Execution of Real Property" with the Registry of
Deeds.chanrob1es virtua1 1aw 1ibrary

The said Certificate of Sale registered with the Register of Deeds
includes at the dorsal portion thereof the following entry, not found in
the Certificate of Sale on file with Deputy Sheriff Renato E. Robles: 13

ORIGINAL CERTIFICATE OF TITLE NO. T-40785

A parcel of land (Lot No. 1103 of the Cadastral Survey of Orani), with
the improvements thereon, situated in the Municipality of Orani,
Bounded on the NE; by Calle P. Gomez; on the E. by Lot No. 1104; on
the SE by Calle Washington; and on the W. by Lot 4102, containing an
area of ONE HUNDRED THIRTY NINE (139) SQUARE METERS, more
or less. All points referred to are indicated on the plan; bearing true;
declination 0 deg. 40E., date of survey, February 191-March 1920.
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9

On February 23, 2001, ten months from the time the Certificate of Sale on
Execution was registered with the Registry of Deeds, petitioner moved
14 for the issuance of a writ of possession. He averred that the one-year
period of redemption had elapsed without the respondents having
redeemed the properties sold at public auction; thus, the sale of said
properties had already become final. He also argued that after the lapse
of the redemption period, the titles to the properties should be
considered, for all legal intents and purposes, in his name and favor. 15

On June 4, 2001, the Regional Trial Court of Balanga City, Branch 1
granted the motion for issuance of writ of possession. 16 Subsequently,
on July 18, 2001, a writ of possession 17 was issued in petitioners favor
which reads:chanrob1es virtual 1aw library

WRIT OF POSSESSION

Mr. Renato E. Robles

Deputy Sheriff

RTC, Br. 1, Balanga City

Greetings:chanrob1es virtual 1aw library

WHEREAS on February 3, 2001, the counsel for plaintiff filed Motion for
the Issuance of Writ of Possession;

WHEREAS on June 4, 2001, this court issued an order granting the
issuance of the Writ of Possession;

WHEREFORE, you are hereby commanded to place the herein plaintiff
Marcelo Soriano in possession of the property involved in this case
situated (sic) more particularly described as:chanrob1es virtual 1aw
library

1. STORE HOUSE constructed on Lot No. 1103 situated at Centro 1,
Orani, Bataan covered by TCT No. 40785;

2. BODEGA constructed on Lot No. 1103 with an area of 42.75 square
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meters under Tax Declaration No. 86 situated at Centro 1, Orani, Bataan;

3. Original Certificate of Title No. 40785 with an area of 134 square
meters known as Lot No. 1103 of the Cadastral Survey of Orani. . .

against the mortgagor/former owners Sps. Ricardo and Rosalinda (sic)
Galit, her (sic) heirs, successors, assigns and all persons claiming rights
and interests adverse to the petitioner and make a return of this writ
every thirty (30) days from receipt hereof together with all the
proceedings thereon until the same has been fully satisfied.

WITNESS THE HONORABLE BENJAMIN T. VIANZON, Presiding
Judge, this 18th day of July 2001, at Balanga City.

(Sgd) GILBERT S. ARGONZA

OIC

Respondents filed a petition for certiorari with the Court of Appeals,
which was docketed as CA-G.R. SP No. 65891, assailing the inclusion of
the parcel of land covered by Transfer Certificate of Title No. T-40785
among the list of real properties in the writ of possession. 18
Respondents argued that said property was not among those sold on
execution by Deputy Sheriff Renato E. Robles as reflected in the
Certificate of Sale on Execution of Real Property.

In opposition, petitioner prayed for the dismissal of the petition because
respondent spouses failed to move for the reconsideration of the assailed
order prior to the filing of the petition. Moreover, the proper remedy
against the assailed order of the trial court is an appeal, or a motion to
quash the writ of possession.

On May 13, 2002, the Court of Appeals rendered judgment as
follows:chanrob1es virtual 1aw library

WHEREFORE, the instant petition is hereby GRANTED. Accordingly,
the writ of possession issued by the Regional Trial Court of Balanga
City, Branch 1, on 18 July 2001 is declared NULL and VOID.

In the event that the questioned writ of possession has already been
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implemented, the Deputy Sheriff of the Regional Trial Court of Balanga
City, Branch 1, and private respondent Marcelo Soriano are hereby
ordered to cause the redelivery of Transfer Certificate of Title No. T-
40785 to the petitioners.

SO ORDERED. 19

Aggrieved, petitioner now comes to this Court maintaining that

1.) THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65
IS NOT THE PLAIN, SPEEDY AND ADEQUATE REMEDY OF THE
RESPONDENTS IN ASSAILING THE WRIT OF POSSESSION ISSUED
BY THE LOWER COURT BUT THERE WERE STILL OTHER
REMEDIES AVAILABLE TO THEM AND WHICH WERE NOT
RESORTED TO LIKE THE FILING OF A MOTION FOR
RECONSIDERATION OR MOTION TO QUASH OR EVEN APPEAL.

2.) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
DECLARING THE CERTIFICATE OF SALE ON EXECUTION OF REAL
PROPERTY AS NULL AND VOID AND SUBSEQUENTLY THE WRIT
OF POSSESSION BECAUSE THE SAME IS A PUBLIC DOCUMENT
WHICH ENJOYS THE PRESUMPTION OF REGULARITY AND IT
CANNOT BE OVERCOME BY A MERE STRANGE FEELING THAT
SOMETHING IS AMISS ON ITS SURFACE SIMPLY BECAUSE THE
TYPEWRITTEN WORDS ON THE FRONT PAGE AND AT THE
DORSAL PORTION THEREOF IS DIFFERENT OR THAT IT IS
UNLIKELY FOR THE SHERIFF TO USE THE DORSAL PORTION OF
THE FIRST PAGE BECAUSE THE SECOND PAGE IS MERELY HALF
FILLED AND THE NOTATION ON THE DORSAL PORTION COULD
STILL BE MADE AT THE SECOND PAGE.

On the first ground, petitioner contends that respondents were not
without remedy before the trial court. He points out that respondents
could have filed a motion for reconsideration of the Order dated June 4,
1999, but they did not do so. Respondents could also have filed an
appeal but they, likewise, did not do so. When the writ of possession
was issued, respondents could have filed a motion to quash the writ.
Again they did not. Respondents cannot now avail of the special civil
action forcertiorari as a substitute for these remedies. They should suffer
the consequences for sleeping on their rights.chanrob1es virtua1 1aw
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1ibrary

We disagree.

Concededly, those who seek to avail of the procedural remedies
provided by the rules must adhere to the requirements thereof, failing
which the right to do so is lost. It is, however, equally settled that the
Rules of Court seek to eliminate undue reliance on technical rules and to
make litigation as inexpensive as practicable and as convenient as can be
done. 20 This is in accordance with the primary purpose of the 1997
Rules of Civil Procedure as provided in Rule 1, Section 6, which
reads:chanrob1es virtual 1aw library

Section 6. Construction. These rules shall be liberally construed in
order to promote their objective of securing a just, speedy and
inexpensive determination of every action and proceeding. 21

The rules of procedure are not to be applied in a very rigid, technical
sense and are used only to help secure substantial justice. If a technical
and rigid enforcement of the rules is made, their aim would be defeated.
22 They should be liberally construed so that litigants can have ample
opportunity to prove their claims and thus prevent a denial of justice
due to technicalities. 23 Thus, in China Banking Corporation v. Members
of the Board of Trustees of Home Development Mutual Fund, 24 it was
held:chanrob1es virtual 1aw library

. . .while certiorari as a remedy may not be used as a substitute for an
appeal, especially for a lost appeal, this rule should not be strictly
enforced if the petition is genuinely meritorious. 25 It has been said that
where the rigid application of the rules would frustrate substantial
justice, or bar the vindication of a legitimate grievance, the courts are
justified in exempting a particular case from the operation of the rules.
26 (Emphasis ours)

Indeed, well-known is the rule that departures from procedure may be
forgiven where they do not appear to have impaired the substantial
rights of the parties. 27 Apropos in this regard is Cometa v. CA, 28
where we said that

There is no question that petitioners were remiss in attending with
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dispatch to the protection of their interests as regards the subject lots,
and for that reason the case in the lower court was dismissed on a
technicality and no definitive pronouncement on the inadequacy of the
price paid for the levied properties was ever made. In this regard, it
bears stressing that procedural rules are not to be belittled or dismissed
simply because their non-observance may have resulted in prejudice to a
partys substantive rights as in this case. Like all rules, they are required
to be followed except when only for the most persuasive of reasons they
may be relaxed to relieve a litigant of an injustice not commensurate
with the degree of his thoughtlessness in not complying with the
procedure prescribed. 29 (emphasis and Italics supplied.)

In short, since rules of procedure are mere tools designed to facilitate the
attainment of justice, their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote
substantial justice must always be avoided. 30 Technicality should not
be allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties. 31

Eschewing, therefore, the procedural objections raised by petitioner, it
behooves us to address the issue of whether or not the questioned writ
of possession is in fact a nullity considering that it includes real property
not expressly mentioned in the Certificate of Sale of Real Property.

Petitioner, in sum, dwells on the general proposition that since the
certificate of sale is a public document, it enjoys the presumption of
regularity and all entries therein are presumed to be done in the
performance of regular functions.

The argument is not persuasive.

There are actually two (2) copies of the Certificate of Sale on Execution
of Real Properties issued on February 4, 1999 involved, namely: (a) copy
which is on file with the deputy sheriff; and (b) copy registered with the
Registry of Deeds. The object of scrutiny, however, is not the copy of the
Certificate of Sale on Execution of Real Properties issued by the deputy
sheriff on February 4, 1999, 32 but the copy thereof subsequently
registered by petitioner with the Registry of Deeds on April 23, 1999, 33
which included an entry on the dorsal portion of the first page thereof
describing a parcel of land covered by OCT No. T-40785 not found in the
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Certificate of Sale of Real Properties on file with the sheriff.

True, public documents by themselves may be adequate to establish the
presumption of their validity. However, their probative weight must be
evaluated not in isolation but in conjunction with other evidence
adduced by the parties in the controversy, much more so in this case
where the contents of a copy thereof subsequently registered for
documentation purposes is being contested. No reason has been offered
how and why the questioned entry was subsequently intercalated in the
copy of the certificate of sale subsequently registered with the Registry
of Deeds. Absent any satisfactory explanation as to why said entry was
belatedly inserted, the surreptitiousness of its inclusion coupled with the
furtive manner of its intercalation casts serious doubt on the authenticity
of petitioners copy of the Certificate of Sale. Thus, it has been held that
while a public document like a notarized deed of sale is vested with the
presumption of regularity, this is not a guarantee of the validity of its
contents. 34

It must be pointed out in this regard that the issuance of a Certificate of
Sale is an end result of judicial foreclosure where statutory requirements
are strictly adhered to; where even the slightest deviations therefrom
will invalidate the proceeding 35 and the sale. 36 Among these
requirements is an explicit enumeration and correct description of what
properties are to be sold stated in the notice. The stringence in the
observance of these requirements is such that an incorrect title number
together with a correct technical description of the property to be sold
and vice versa is deemed a substantial and fatal error which results in
the invalidation of the sale. 37

The certificate of sale is an accurate record of what properties were
actually sold to satisfy the debt. The strictness in the observance of
accuracy and correctness in the description of the properties renders the
enumeration in the certificate exclusive. Thus, subsequently including
properties which have not been explicitly mentioned therein for
registration purposes under suspicious circumstances smacks of fraud.
The explanation that the land on which the properties sold is necessarily
included and, hence, was belatedly typed on the dorsal portion of the
copy of the certificate subsequently registered is at best a lame excuse
unworthy of belief.chanrob1es virtua1 1aw 1ibrary

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The appellate court correctly observed that there was a marked
difference in the appearance of the typewritten words appearing on the
first page of the copy of the Certificate of Sale registered with the
Registry of Deeds 38 and those appearing at the dorsal portion thereof.
Underscoring the irregularity of the intercalation is the clearly devious
attempt to let such an insertion pass unnoticed by typing the same at the
back of the first page instead of on the second page which was merely
half-filled and could accommodate the entry with room to spare.

The argument that the land on which the buildings levied upon in
execution is necessarily included is, likewise, tenuous. Article 415 of the
Civil Code provides:chanrob1es virtual 1aw library

ART. 415. The following are immovable property:chanrob1es virtual
1aw library

(1) Land, buildings, roads and constructions of all kinds adhered to the
soil:chanrob1es virtual 1aw library
x x x

(3) Everything attached to an immovable in a fixed manner, in such a
way that it cannot be separated therefrom without breaking the material
or deterioration of the object;

(4) Statues, reliefs, paintings or other objects for use or ornamentation,
placed in buildings or on lands by the owner of the immovable in such a
manner that it reveals the intention to attach them permanently to the
tenements;

(5) Machinery, receptacles, instruments or implements intended by the
owner of the tenement for an industry or works which may be carried
on in a building or on a piece of land, and which tend directly to meet
the needs of the said industry or works;

(6) Animal houses, pigeon houses, beehives, fish ponds or breeding
places of similar nature, in case their owner has placed them or
preserves them with the intention to have them permanently attached to
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the land, and forming a permanent part of it; the animals in these places
are also included;
x x x

(9) Docks and structures which, though floating, are intended by their
nature and object to remain at a fixed place on a river, lake or coast;

x x x.

The foregoing provision of the Civil Code enumerates land and
buildings separately. This can only mean that a building is, by itself,
considered immovable. 39 Thus, it has been held that

. . . while it is true that a mortgage of land necessarily includes, in the
absence of stipulation of the improvements thereon, buildings, still a
building by itself may be mortgaged apart from the land on which it has
been built. Such mortgage would be still a real estate mortgage for the
building would still be considered immovable property even if dealt
with separately and apart from the land. 40 (emphasis and Italics
supplied)

In this case, considering that what was sold by virtue of the writ of
execution issued by the trial court was merely the storehouse and
bodega constructed on the parcel of land covered by Transfer Certificate
of Title No. T-40785, which by themselves are real properties of
respondents spouses, the same should be regarded as separate and
distinct from the conveyance of the lot on which they stand.

WHEREFORE, in view of all the foregoing, the petition is hereby
DENIED for lack of merit. The Decision dated May 13, 2002 of the Court
of Appeals in CA-G.R. SP No. 65891, which declared the writ of
possession issued by the Regional Trial Court of Balanga City, Branch 1,
on July 18, 2001, null and void, is AFFIRMED in toto.chanrob1es virtua1
1aw 1ibrary

SO ORDERED.

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V.
EN BANC
[G.R. NO. 155650 : July 20, 2006]
MANILA INTERNATIONAL AIRPORT
AUTHORITY, Petitioner, v. COURT OF APPEALS, CITY OF
PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF
PARAAQUE, and CITY TREASURER OF
PARAAQUE, Respondents.
D E C I S I O N
CARPIO, J.:
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the
Ninoy Aquino International Airport (NAIA) Complex in Paraaque
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
298
2
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

On 21 March 1997, the Office of the Government Corporate Counsel
(OGCC) issued Opinion No. 061. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate tax
granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
negotiated with respondent City of Paraaque to pay the real estate tax
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imposed by the City. MIAA then paid some of the real estate tax already
due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax
Delinquency from the City of Paraaque for the taxable years 1992 to
2001. MIAA's real estate tax delinquency is broken down as follows:
TAX
DECLARATIO
N
TAXABL
E YEAR
TAX DUE PENALTY TOTAL
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
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
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
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
GRAND
TOTAL
P392,435,861.9
5
P232,070,863.4
7
P 624,506,725.4
2
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for
P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.00
6

On 17 July 2001, the City of Paraaque, through its City Treasurer,
issued notices of levy and warrants of levy on the Airport Lands and
Buildings. The Mayor of the City of Paraaque 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.
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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 Paraaque 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 Paraaque posted notices of
auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and
Tambo, Paraaque City; in the public market of Barangay La Huerta;
and in the main lobby of the Paraaque City Hall. The City of
Paraaque 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 Paraaque 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 Paraaque, City Mayor of
Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of
Paraaque, and the City Assessor of Paraaque ("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
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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 Paraaque, 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.
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Respondents also cite the ruling of this Court in Mactan International
Airport v. Marcos
8
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
Paraaque, 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.
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
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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)cralawlibrary
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 Charter
9
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.
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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?cralawlibrary
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:
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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)cralawlibrary
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 authority
13
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
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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:
x x x
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units.(Emphasis
and underscoring supplied)cralawlibrary
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
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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 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)
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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)cralawlibrary
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
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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
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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 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
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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)cralawlibrary
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 Paraaque 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 encumber
26
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
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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)cralawlibrary
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)cralawlibrary
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:
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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:
(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)cralawlibrary
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
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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)cralawlibrary
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; andcralawlibrary
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
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authority includes the creation of new entities, agencies and
instrumentalities of the Government[.] (Emphasis supplied)cralawlibrary
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.
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
(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;
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x x x. (Emphasis supplied)cralawlibrary
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
andinstrumentalities 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 ataxable
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
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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
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
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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:
x x x
(o) Taxes, fees or charges of any kinds on the National Government, its
agencies and instrumentalities, and local government units. (Emphasis
and underscoring supplied)cralawlibrary
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
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any of the exempt entities under Section 193. (Emphasis
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
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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
(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)cralawlibrary
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
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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)cralawlibrary
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.
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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:
x x x
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
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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.
x x x
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 Republic. Such GOCCs are not empowered to
declare dividends or alienate their capital shares.
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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)cralawlibrary
Likewise, the special charter
41
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
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
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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
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.
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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:
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
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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
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-
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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;
andcralawlibrary
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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 fees
47
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
(10) Instrumentality refers to any agency of the National Government,
not integrated within the department framework, vested with special
autonomy, usually through a charter. x x x (Emphasis
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
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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)cralawlibrary
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
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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 Paraaque.
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 Paraaque. We
declare VOID all the real estate tax assessments, including the final
notices of real estate tax delinquencies, issued by the City of Paraaque
on the Airport Lands and Buildings of the Manila International Airport
Authority, except for the portions that the Manila International Airport
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Authority has leased to private parties. We also declareVOID the
assailed auction sale, and all its effects, of the Airport Lands and
Buildings of the Manila International Airport Authority.
No costs.
SO ORDERED.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-
Gutierrez, Austria-Martinez, Corona, Carpio Morales, Callejo, Sr.,
Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., JJ., concur.

DISSENTING OPINION
TINGA, J.:
The legally correct resolution of this petition would have had the added
benefit of an utterly fair and equitable result - a recognition of the
constitutional and statutory power of the City of Paraaque to impose
real property taxes on the Manila International Airport Authority
(MIAA), but at the same time, upholding a statutory limitation that
prevents the City of Paraaque from seizing and conducting an
execution sale over the real properties of MIAA. In the end, all that the
City of Paraaque would hold over the MIAA is a limited lien,
unenforceable as it is through the sale or disposition of MIAA
properties. Not only is this the legal effect of all the relevant
constitutional and statutory provisions applied to this case, it also leaves
the room for negotiation for a mutually acceptable resolution between
the City of Paraaque and MIAA.
Instead, with blind but measured rage, the majority today veers wildly
off-course, shattering statutes and judicial precedents left and right in
order to protect the precious Ming vase that is the Manila International
Airport Authority (MIAA). While the MIAA is left unscathed, it is
surrounded by the wreckage that once was the constitutional policy,
duly enacted into law, that was local autonomy. Make no mistake, the
majority has virtually declared war on the seventy nine (79) provinces,
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one hundred seventeen (117) cities, and one thousand five hundred
(1,500) municipalities of the Philippines.
1

The icing on this inedible cake is the strained and purposely vague
rationale used to justify the majority opinion. Decisions of the Supreme
Court are expected to provide clarity to the parties and to students of
jurisprudence, as to what the law of the case is, especially when the
doctrines of long standing are modified or clarified. With all due respect,
the decision in this case is plainly so, so wrong on many levels. More
egregious, in the majority's resolve to spare the Manila International
Airport Authority (MIAA) from liability for real estate taxes, no clear-cut
rule emerges on the important question of the power of local
government units (LGUs) to tax government corporations,
instrumentalities or agencies.
The majority would overturn sub silencio, among others, at least one
dozen precedents enumerated below:
1) Mactan-Cebu International Airport Authority v. Hon. Marcos,
2
the
leading case penned in 1997 by recently retired Chief Justice Davide,
which held that the express withdrawal by the Local Government Code
of previously granted exemptions from realty taxes applied to
instrumentalities and government-owned or controlled corporations
(GOCCs) such as the Mactan-Cebu International Airport Authority
(MCIAA). The majority invokes the ruling in Basco v. Pagcor,
3
a
precedent discredited in Mactan, and a vanguard of a doctrine so
noxious to the concept of local government rule that the Local
Government Code was drafted precisely to counter such philosophy.
The efficacy of several rulings that expressly rely on Mactan, such as
PHILRECA v. DILG Secretary,
4
City Government of San Pablo v. Hon.
Reyes
5
is now put in question.
2) The rulings in National Power Corporation v. City of
Cabanatuan,
6
wherein the Court, through Justice Puno, declared that the
National Power Corporation, a GOCC, is liable for franchise taxes under
the Local Government Code, and succeeding cases that have relied on it
such as Batangas Power Corp. v. Batangas City
7
The majority now states
that deems instrumentalities as defined under the Administrative Code
of 1987 as purportedly beyond the reach of any form of taxation by
LGUs, stating "[l]ocal governments are devoid of power to tax the
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national government, its agencies and instrumentalities."
8
Unfortunately,
using the definition employed by the majority, as provided by Section
2(d) of the Administrative Code, GOCCs are also considered as
instrumentalities, thus leading to the astounding conclusion that GOCCs
may not be taxed by LGUs under the Local Government Code.
3) Lung Center of the Philippines v. Quezon City,
9
wherein a unanimous
en banc Court held that the Lung Center of the Philippines may be liable
for real property taxes. Using the majority's reasoning, the Lung Center
would be properly classified as an instrumentality which the majority
now holds as exempt from all forms of local taxation.
10

4) City of Davao v. RTC,
11
where the Court held that the Government
Service Insurance System (GSIS) was liable for real property taxes for the
years 1992 to 1994, its previous exemption having been withdrawn by
the enactment of the Local Government Code.
12
This decision, which
expressly relied on Mactan, would be directly though silently overruled
by the majority.
5) The common essence of the Court's rulings in the two Philippine Ports
Authority v. City of Iloilo,
13
cases penned by Justices Callejo and Azcuna
respectively, which relied in part on Mactan in holding the Philippine
Ports Authority (PPA) liable for realty taxes, notwithstanding the fact
that it is a GOCC. Based on the reasoning of the majority, the PPA
cannot be considered a GOCC. The reliance of these cases on Mactan,
and its rationale for holding governmental entities like the PPA liable for
local government taxation is mooted by the majority.
6) The 1963 precedent of Social Security System Employees Association
v. Soriano,
14
which declared the Social Security Commission (SSC) as a
GOCC performing proprietary functions. Based on the rationale
employed by the majority, the Social Security System is not a GOCC. Or
perhaps more accurately, "no longer" a GOCC.
7) The decision penned by Justice (now Chief Justice) Panganiban, Light
Rail Transit Authority v. Central Board of Assessment.
15
The
characterization therein of the Light Rail Transit Authority (LRTA) as a
"service-oriented commercial endeavor" whose patrimonial property is
subject to local taxation is now rendered inconsequential, owing to the
majority's thinking that an entity such as the LRTA is itself exempt from
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local government taxation
16
, irrespective of the functions it performs.
Moreover, based on the majority's criteria, LRTA is not a GOCC.
8) The cases of Teodoro v. National Airports Corporation
17
and Civil
Aeronautics Administration v. Court of Appeals.
18
wherein the Court
held that the predecessor agency of the MIAA, which was similarly
engaged in the operation, administration and management of the Manila
International Agency, was engaged in the exercise of proprietary, as
opposed to sovereign functions. The majority would hold otherwise that
the property maintained by MIAA is actually patrimonial, thus implying
that MIAA is actually engaged in sovereign functions.
9) My own majority in Phividec Industrial Authority v. Capitol
Steel,
19
wherein the Court held that the Phividec Industrial Authority, a
GOCC, was required to secure the services of the Office of the
Government Corporate Counsel for legal representation.
20
Based on the
reasoning of the majority, Phividec would not be a GOCC, and the
mandate of the Office of the Government Corporate Counsel extends
only to GOCCs.
10) Two decisions promulgated by the Court just last month (June 2006),
National Power Corporation v. Province of Isabela
21
and GSIS v. City
Assessor of Iloilo City.
22
In the former, the Court pronounced that
"[a]lthough as a general rule, LGUs cannot impose taxes, fees, or charges
of any kind on the National Government, its agencies and
instrumentalities, this rule admits of an exception, i.e., when specific
provisions of the LGC authorize the LGUs to impose taxes, fees or
charges on the aforementioned entities." Yet the majority now rules that
the exceptions in the LGC no longer hold, since "local governments are
devoid of power to tax the national government, its agencies and
instrumentalities."
23
The ruling in the latter case, which held the GSIS as
liable for real property taxes, is now put in jeopardy by the majority's
ruling.
There are certainly many other precedents affected, perhaps all previous
jurisprudence regarding local government taxation vis-a-vis government
entities, as well as any previous definitions of GOCCs, and previous
distinctions between the exercise of governmental and proprietary
functions (a distinction laid down by this Court as far back as 1916
24
).
What is the reason offered by the majority for overturning or modifying
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all these precedents and doctrines? None is given, for the majority takes
comfort instead in the pretense that these precedents never existed. Only
children should be permitted to subscribe to the theory that something
bad will go away if you pretend hard enough that it does not exist.
I.
Case Should Have Been Decided Following Mactan Precedent
The core issue in this case, whether the MIAA is liable to the City of
Paraaque for real property taxes under the Local Government Code,
has already been decided by this Court in the Mactan case, and should
have been resolved by simply applying precedent.
Mactan Explained
A brief recall of the Mactan case is in order. The Mactan-Cebu
International Airport Authority (MCIAA) claimed that it was exempt
from payment of real property taxes to the City of Cebu, invoking the
specific exemption granted in Section 14 of its charter, Republic Act No.
6958, and its status as an instrumentality of the government performing
governmental functions.
25
Particularly, MCIAA invoked Section 133 of
the Local Government Code, precisely the same provision utilized by
the majority as the basis for MIAA's exemption. Section 133 reads:
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:
x x x
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units. (emphasis and
underscoring supplied).
However, the Court in Mactan noted that Section 133 qualified the
exemption of the National Government, its agencies and
instrumentalities from local taxation with the phrase "unless otherwise
provided herein." It then considered the other relevant provisions of the
Local Government Code, particularly the following:
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SEC. 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise
provided in this Code, tax exemption or incentives granted to, or
enjoyed by all persons, whether natural or juridical, including
government-owned and controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.
26

SECTION 232. Power to Levy Real Property Tax. - A province or city or
a municipality within the Metropolitan Manila area may levy an annual
ad valorem tax on real property such as land, building, machinery, and
other improvements not hereafter specifically exempted.
27

SECTION 234. Exemptions from Real Property Tax. - - The following are
(a) Real property owned by the Republic of the Philippines or any of its
granted, for consideration or otherwise, to a taxable person:
(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;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned and
controlled corporations engaged in the distribution of water and/or
generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided
for under R.A. No. 6938; andcralawlibrary
(e) Machinery and equipment used for pollution control and
environmental protection.
Except as provided herein, any exemption from payment of real
property tax previously granted to, or presently enjoyed by, all persons,
whether natural or juridical, including all government-owned or
controlled corporations are hereby withdrawn upon the effectivity of
this Code.
28

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Clearly, Section 133 was not intended to be so absolute a prohibition on
the power of LGUs to tax the National Government, its agencies and
instrumentalities, as evidenced by these cited provisions which
"otherwise provided." But what was the extent of the limitation under
Section 133? This is how the Court, correctly to my mind, defined the
parameters in Mactan:
The foregoing sections of the LGC speak of: (a) the limitations on the
taxing powers of local government units and the exceptions to such
limitations; and (b) the rule on tax exemptions and the exceptions
thereto. The use of exceptions or provisos in these sections, as shown by
the following clauses:
(1) "unless otherwise provided herein" in the opening paragraph of
Section 133;
(2) "Unless otherwise provided in this Code" in Section 193;
(3) "not hereafter specifically exempted" in Section 232; andcralawlibrary
(4) "Except as provided herein" in the last paragraph of Section 234
initially hampers a ready understanding of the sections. Note, too, that
the aforementioned clause in Section 133 seems to be inaccurately
worded. Instead of the clause "unless otherwise provided herein," with
the "herein" to mean, of course, the section, it should have used the
clause "unless otherwise provided in this Code." The former results in
absurdity since the section itself enumerates what are beyond the taxing
powers of local government units and, where exceptions were intended,
the exceptions are explicitly indicated in the next. For instance, in item
(a) which excepts income taxes "when levied on banks and other
financial institutions"; item (d) which excepts "wharfage on wharves
constructed and maintained by the local government unit concerned";
and item (1) which excepts taxes, fees and charges for the registration
and issuance of licenses or permits for the driving of "tricycles." It may
also be observed that within the body itself of the section, there are
exceptions which can be found only in other parts of the LGC, but the
section interchangeably uses therein the clause, "except as otherwise
provided herein" as in items (c) and (i), or the clause "except as provided
in this Code" in item (j). These clauses would be obviously unnecessary
or mere surplusages if the opening clause of the section were "Unless
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otherwise provided in this Code" instead of "Unless otherwise provided
herein." In any event, even if the latter is used, since under Section 232
local government units have the power to levy real property tax, except
those exempted therefrom under Section 234, then Section 232 must be
deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the LGC, we
conclude that as a general rule, as laid down in Section 133, the taxing
powers of local government units cannot extend to the levy of, inter alia,
"taxes, fees and charges of any kind on the National Government, its
agencies and instrumentalities, and local government units"; however,
pursuant to Section 232, provinces, cities, and municipalities in the
Metropolitan Manila Area may impose the real property tax except on,
inter alia, "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," as
provided in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by
natural or judicial persons, including government-owned and controlled
corporations, Section 193 of the LGC prescribes the general rule, viz.,
they are withdrawn upon the effectivity of the LGC, except those
granted to local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the LGC. The latter
proviso could refer to Section 234 which enumerates the properties
exempt from real property tax. But the last paragraph of Section 234
further qualifies the retention of the exemption insofar as real property
taxes are concerned by limiting the retention only to those enumerated
therein; all others not included in the enumeration lost the privilege
upon the effectivity of the LGC. Moreover, even as to real property
owned by the Republic of the Philippines or any of its political
subdivisions covered by item (a) of the first paragraph of Section 234,
the exemption is withdrawn if the beneficial use of such property has
been granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon
the effectivity of the LGC, exemptions from payment of real property
taxes granted to natural or juridical persons, including government-
owned or controlled corporations, except as provided in the said section,
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and the petitioner is, undoubtedly, a government-owned corporation, it
necessarily follows that its exemption from such tax granted it in Section
14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the
contrary can only be justified if the petitioner can seek refuge under any
of the exceptions provided in Section 234, but not under Section 133, as it
now asserts, since, as shown above, the said section is qualified by
Sections 232 and 234.
29

The Court in Mactan acknowledged that under Section 133,
instrumentalities were generally exempt from all forms of local
government taxation, unless otherwise provided in the Code. On the
other hand, Section 232 "otherwise provided" insofar as it allowed LGUs
to levy an ad valorem real property tax, irrespective of who owned the
property. At the same time, the imposition of real property taxes under
Section 232 is in turn qualified by the phrase "not hereinafter specifically
exempted." The exemptions from real property taxes are enumerated in
Section 234, which specifically states that only real properties owned "by
the Republic of the Philippines or any of its political subdivisions" are
exempted from the payment of the tax. Clearly, instrumentalities or
GOCCs do not fall within the exceptions under Section 234.
30

Mactan Overturned the
Precedents Now Relied
Upon by the Majority
But the petitioners in Mactan also raised the Court's ruling in Basco v.
PAGCOR,
31
decided before the enactment of the Local Government
Code. The Court in Basco declared the PAGCOR as exempt from local
taxes, justifying the exemption in this wise:
Local governments have no power to tax instrumentalities of the
National Government. PAGCOR is a government owned or controlled
corporation with an original charter, PD 1869. All of its shares of stocks
are owned by the National Government. In addition to its corporate
powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers xxx
PAGCOR has a dual role, to operate and to regulate gambling casinos.
The latter role is governmental, which places it in the category of an
agency or instrumentality of the Government. Being an instrumentality
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of the Government, PAGCOR should be and actually is exempt from
local taxes. Otherwise, its operation might be burdened, impeded or
subjected to control by a mere Local government.
"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." (McCulloch v. Marland, 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
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
activates 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" (McCulloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent
power to wield it.
32

Basco is as strident a reiteration of the old guard view that frowned on
the principle of local autonomy, especially as it interfered with the
prerogatives and privileges of the national government. Also consider
the following citation from Maceda v. Macaraig,
33
decided the same year
as Basco. Discussing the rule of construction of tax exemptions on
government instrumentalities, the sentiments are of a similar vein.
Moreover, it is a recognized principle that the rule on strict
interpretation does not apply in the case of exemptions in favor of a
government political subdivision or instrumentality.
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The basis for applying the rule of strict construction to statutory
provisions granting tax exemptions or deductions, even more obvious
than with reference to the affirmative or levying provisions of tax
statutes, is to minimize differential treatment and foster impartiality,
fairness, and equality of treatment among tax payers.
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.
In the case of property owned by the state or a city or other public
corporations, the express exemption should not be construed with the
same degree of strictness that applies to exemptions contrary to the
policy of the state, since as to such property "exemption is the rule and
taxation the exception."
34

Strikingly, the majority cites these two very cases and the stodgy
rationale provided therein. This evinces the perspective from which the
majority is coming from. It is admittedly a viewpoint once shared by this
Court, and en vogue prior to the enactment of the Local Government
Code of 1991.
However, the Local Government Code of 1991 ushered in a new ethos
on how the art of governance should be practiced in the Philippines,
conceding greater powers once held in the private reserve of the national
government to LGUs. The majority might have private qualms about the
wisdom of the policy of local autonomy, but the members of the Court
are not expected to substitute their personal biases for the legislative
will, especially when the 1987 Constitution itself promotes the principle
of local autonomy.
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
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Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local
autonomy.
Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government
structure instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities, and
resources, and provide for the qualifications, election, appointment and
removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and operation
of the local units.
xxx
Section 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments.
xxx
The Court in Mactan recognized that a new day had dawned with the
enactment of the 1987 Constitution and the Local Government Code of
1991. Thus, it expressly rejected the contention of the MCIAA that Basco
was applicable to them. In doing so, the language of the Court was
dramatic, if only to emphasize how monumental the shift in philosophy
was with the enactment of the Local Government Code:
Accordingly, the position taken by the [MCIAA] is untenable. Reliance
on Basco v. Philippine Amusement and Gaming Corporation is
unavailing since it was decided before the effectivity of the [Local
Government Code]. Besides, nothing can prevent Congress from
decreeing that even instrumentalities or agencies of the Government
performing governmental functions may be subject to tax. Where it is
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done precisely to fulfill a constitutional mandate and national policy, no
one can doubt its wisdom.
35
(emphasis supplied)
The Court Has Repeatedly
Reaffirmed Mactan Over the
Precedents Now Relied Upon
By the Majority
Since then and until today, the Court has been emphatic in declaring the
Basco doctrine as dead. The notion that instrumentalities may be
subjected to local taxation by LGUs was again affirmed in National
Power Corporation v. City of Cabanatuan,
36
which was penned by
Justice Puno. NPC or Napocor, invoking its continued exemption from
payment of franchise taxes to the City of Cabanatuan, alleged that it was
an instrumentality of the National Government which could not be
taxed by a city government. To that end, Basco was cited by NPC. The
Court had this to say about Basco.
xxx[T]he doctrine in Basco v. Philippine Amusement and Gaming
Corporation relied upon by the petitioner to support its claim no longer
applies. To emphasize, the Basco case was decided prior to the
effectivity of the LGC, when no law empowering the local government
units to tax instrumentalities of the National Government was in effect.
However, as this Court ruled in the case of Mactan Cebu International
Airport Authority (MCIAA) v. Marcos, nothing prevents Congress from
decreeing that even instrumentalities or agencies of the government
performing governmental functions may be subject to tax. In enacting
the LGC, Congress exercised its prerogative to tax instrumentalities and
agencies of government as it sees fit. Thus, after reviewing the specific
provisions of the LGC, this Court held that MCIAA, although an
instrumentality of the national government, was subject to real property
tax.
37

In the 2003 case of Philippine Ports Authority v. City of Iloilo,
38
the
Court, in the able ponencia of Justice Azcuna, affirmed the levy of realty
taxes on the PPA. Although the taxes were assessed under the old Real
Property Tax Code and not the Local Government Code, the Court again
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cited Mactan to refute PPA's invocation of Basco as the basis of its
exemption.
[Basco] did not absolutely prohibit local governments from taxing
government instrumentalities. In fact we stated therein:
The power of local government to "impose taxes and fees" is always
subject to "limitations" which Congress may provide by law. Since P.D.
1869 remains an "operative" law until "amended, repealed or revoked". .
. its "exemption clause" remains an exemption to the exercise of the
power of local governments to impose taxes and fees.
Furthermore, in the more recent case of Mactan Cebu International
Airport Authority v. Marcos, where the Basco case was similarly
invoked for tax exemption, we stated: "[N]othing can prevent Congress
from decreeing that even instrumentalities or agencies of the
Government performing governmental functions may be subject to tax.
Where it is done precisely to fulfill a constitutional mandate and
national policy, no one can doubt its wisdom." The fact that tax
exemptions of government-owned or controlled corporations have been
expressly withdrawn by the present Local Government Code clearly
attests against petitioner's claim of absolute exemption of government
instrumentalities from local taxation.
39

Just last month, the Court in National Power Corporation v. Province of
Isabela
40
again rejected Basco in emphatic terms. Held the Court,
through Justice Callejo, Sr.:
Thus, the doctrine laid down in the Basco case is no longer true. In the
Cabanatuan case, the Court noted primarily that the Basco case was
decided prior to the effectivity of the LGC, when no law empowering
the local government units to tax instrumentalities of the National
Government was in effect. It further explained that in enacting the LGC,
Congress empowered the LGUs to impose certain taxes even on
instrumentalities of the National Government.
41

The taxability of the PPA recently came to fore in Philippine Ports
Authority v. City of Iloilo
42
case, a decision also penned by Justice
Callejo, Sr., wherein the Court affirmed the sale of PPA's properties at
public auction for failure to pay realty taxes. The Court again reiterated
that "it was the intention of Congress to withdraw the tax exemptions
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granted to or presently enjoyed by all persons, including government-
owned or controlled corporations, upon the effectivity" of the
Code.
43
The Court in the second Public Ports Authority case likewise
cited Mactan as providing the "raison d'etre for the withdrawal of the
exemption," namely, "the State policy to ensure autonomy to local
governments and the objective of the [Local Government Code] that
they enjoy genuine and meaningful local autonomy to enable them to
attain their fullest development as self-reliant communities. . . . "
44

Last year, the Court, in City of Davao v. RTC,
45
affirmed that the
legislated exemption from real property taxes of the Government Service
Insurance System (GSIS) was removed under the Local Government
Code. Again, Mactan was relied upon as the governing precedent. The
removal of the tax exemption stood even though the then GSIS
law
46
prohibited the removal of GSIS' tax exemptions unless the
exemption was specifically repealed, "and a provision is enacted to
substitute the declared policy of exemption from any and all taxes as an
essential factor for the solvency of the fund."
47
The Court, citing
established doctrines in statutory construction and Duarte v.
Dade
48
ruled that such proscription on future legislation was itself
prohibited, as "the legislature cannot bind a future legislature to a
particular mode of repeal."
49

And most recently, just less than one month ago, the Court, through
Justice Corona in Government Service Insurance System v. City Assessor
of Iloilo
50
again affirmed that the Local Government Code removed the
previous exemption from real property taxes of the GSIS. Again Mactan
was cited as having "expressly withdrawn the [tax] exemption of the
[GOCC].
51

Clearly then, Mactan is not a stray or unique precedent, but the basis of
a jurisprudential rule employed by the Court since its adoption, the
doctrine therein consistent with the Local Government Code.
Corollarily, Basco, the polar opposite of Mactan has been emphatically
rejected and declared inconsistent with the Local Government Code.
II.
Majority, in Effectively Overturning Mactan,
Refuses to Say Why Mactan Is Wrong
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The majority cites Basco in support. It does not cite Mactan, other than
an incidental reference that it is relied upon by the
respondents.
52
However, the ineluctable conclusion is that the majority
rejects the rationale and ruling in Mactan. The majority provides for a
wildly different interpretation of Section 133, 193 and 234 of the Local
Government Code than that employed by the Court in Mactan.
Moreover, the parties in Mactan and in this case are similarly situated,
as can be obviously deducted from the fact that both petitioners are
airport authorities operating under similarly worded charters. And the
fact that the majority cites doctrines contrapuntal to the Local
Government Code as in Basco and Maceda evinces an intent to go
against the Court's jurisprudential trend adopting the philosophy of
expanded local government rule under the Local Government Code.
Before I dwell upon the numerous flaws of the majority, a brief
comment is necessitated on the majority's studied murkiness vis - -vis
the Mactan precedent. The majority is obviously inconsistent with
Mactan and there is no way these two rulings can stand together.
Following basic principles in statutory construction, Mactan will be
deemed as giving way to this new ruling.
However, the majority does not bother to explain why Mactan is wrong.
The interpretation in Mactan of the relevant provisions of the Local
Government Code is elegant and rational, yet the majority refuses to
explain why this reasoning of the Court in Mactan is erroneous. In fact,
the majority does not even engage Mactan in any meaningful way. If the
majority believes that Mactan may still stand despite this ruling, it
remains silent as to the viable distinctions between these two cases.
The majority's silence on Mactan is baffling, considering how different
this new ruling is with the ostensible precedent. Perhaps the majority
does not simply know how to dispense with the ruling in Mactan. If
Mactan truly deserves to be discarded as precedent, it deserves a more
honorable end than death by amnesia or ignonominous disregard. The
majority could have devoted its discussion in explaining why it thinks
Mactan is wrong, instead of pretending that Mactan never existed at all.
Such an approach might not have won the votes of the minority, but at
least it would provide some degree of intellectual clarity for the parties,
LGUs and the national government, students of jurisprudence and
practitioners. A more meaningful debate on the matter would have been
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possible, enriching the study of law and the intellectual dynamic of this
Court.
There is no way the majority can be justified unless Mactan is
overturned. The MCIAA and the MIAA are similarly situated. They are
both, as will be demonstrated, GOCCs, commonly engaged in the
business of operating an airport. They are the owners of airport
properties they respectively maintain and hold title over these
properties in their name.
53
These entities are both owned by the State,
and denied by their respective charters the absolute right to dispose of
their properties without prior approval elsewhere.
54
Both of them are
not empowered to obtain loans or encumber their properties without
prior approval the prior approval of the President.
55

III.
Instrumentalities, Agencies
And GOCCs Generally
Liable for Real Property Tax
I shall now proceed to demonstrate the errors in reasoning of the
majority. A bulwark of my position lies with Mactan, which will further
demonstrate why the majority has found it inconvenient to even grapple
with the precedent that is Mactan in the first place.
Mactan held that the prohibition on taxing the national government, its
agencies and instrumentalities under Section 133 is qualified by Section
232 and Section 234, and accordingly, the only relevant exemption now
applicable to these bodies is as provided under Section 234(o), or on
"real property owned by the Republic of the Philippines or any of its
granted, for consideration or otherwise, to a taxable person."
It should be noted that the express withdrawal of previously granted
exemptions by the Local Government Code do not even make any
distinction as to whether the exempt person is a governmental entity or
not. As Sections 193 and 234 both state, the withdrawal applies to "all
persons, including [GOCCs]", thus encompassing the two classes of
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persons recognized under our laws, natural persons
56
and juridical
persons.
57

The fact that the Local Government Code mandates the withdrawal of
previously granted exemptions evinces certain key points. If an entity
was previously granted an express exemption from real property taxes
in the first place, the obvious conclusion would be that such entity
would ordinarily be liable for such taxes without the exemption. If such
entities were already deemed exempt due to some overarching principle
of law, then it would be a redundancy or surplusage to grant an
exemption to an already exempt entity. This fact militates against the
claim that MIAA is preternaturally exempt from realty taxes, since it
required the enactment of an express exemption from such taxes in its
charter.
Amazingly, the majority all but ignores the disquisition in Mactan and
asserts that government instrumentalities are not taxable persons unless
they lease their properties to a taxable person. The general rule laid
down in Section 232 is given short shrift. In arriving at this conclusion,
several leaps in reasoning are committed.
Majority's Flawed Definition
of GOCCs.
The majority takes pains to assert that the MIAA is not a GOCC, but
rather an instrumentality. However, and quite grievously, the supposed
foundation of this assertion is an adulteration.
The majority gives the impression that a government instrumentality is a
distinct concept from a government corporation.
58
Most tellingly, the
majority selectively cites a portion of Section 2(10) of the Administrative
Code of 1987, as follows:
Instrumentality refers to any agency of the National Government not
autonomy, usually through a charter. xxx
59
(emphasis omitted)
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However, Section 2(10) of the Administrative Code, when read in full,
makes an important clarification which the majority does not show. The
portions omitted by the majority are highlighted below:
(10)Instrumentality refers to any agency of the National Government not
autonomy, usually through a charter. This term includes regulatory
agencies, chartered institutions and government owned or controlled
corporations.
60

Since Section 2(10) makes reference to "agency of the National
Government," Section 2(4) is also worth citing in full:
(4) Agency of the Government refers to any of the various units of the
Government, including a department, bureau, office, instrumentality, or
government-owned or controlled corporation, or a local government or
a distinct unit therein. (emphasis supplied)
61

Clearly then, based on the Administrative Code, a GOCC may be an
instrumentality or an agency of the National Government. Thus, there
actually is no point in the majority's assertion that MIAA is not a GOCC,
since based on the majority's premise of Section 133 as the key provision,
the material question is whether MIAA is either an instrumentality, an
agency, or the National Government itself. The very provisions of the
Administrative Code provide that a GOCC can be either an
instrumentality or an agency, so why even bother to extensively discuss
whether or not MIAA is a GOCC?cralawlibrary
Indeed as far back as the 1927 case of Government of the Philippine
Islands v. Springer,
62
the Supreme Court already noted that a
corporation of which the government is the majority stockholder
"remains an agency or instrumentality of government."
63

Ordinarily, the inconsequential verbiage stewing in judicial opinions
deserve little rebuttal. However, the entire discussion of the majority on
the definition of a GOCC, obiter as it may ultimately be, deserves
emphatic refutation. The views of the majority on this matter are very
dangerous, and would lead to absurdities, perhaps unforeseen by the
majority. For in fact, the majority effectively declassifies many entities
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created and recognized as GOCCs and would give primacy to the
Administrative Code of 1987 rather than their respective charters as to
the definition of these entities.
Majority Ignores the Power
Of Congress to Legislate and
Define Chartered Corporations
First, the majority declares that, citing Section 2(13) of the
Administrative Code, a GOCC must be "organized as a stock or non-
stock corporation," as defined under the Corporation Code. To insist on
this as an absolute rule fails on bare theory. Congress has the undeniable
power to create a corporation by legislative charter, and has been doing
so throughout legislative history. There is no constitutional prohibition
on Congress as to what structure these chartered corporations should
take on. Clearly, Congress has the prerogative to create a corporation in
whatever form it chooses, and it is not bound by any traditional format.
Even if there is a definition of what a corporation is under the
Corporation Code or the Administrative Code, these laws are by no
means sacrosanct. It should be remembered that these two statutes fall
within the same level of hierarchy as a congressional charter, since they
all are legislative enactments. Certainly, Congress can choose to
disregard either the Corporation Code or the Administrative Code in
defining the corporate structure of a GOCC, utilizing the same extent of
legislative powers similarly vesting it the putative ability to amend or
abolish the Corporation Code or the Administrative Code.
These principles are actually recognized by both the Administrative
Code and the Corporation Code. The definition of GOCCs, agencies and
instrumentalities under the Administrative Code are laid down in the
section entitled "General Terms Defined," which qualifies:
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: (emphasis supplied)
xxx
Similar in vein is Section 6 of the Corporation Code which provides:
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SEC. 4. Corporations created by special laws or charters.' Corporations
created by special laws or charters shall be governed primarily by the
provisions of the special law or charter creating them or applicable to
them, supplemented by the provisions of this Code, insofar as they are
applicable. (emphasis supplied)
Thus, the clear doctrine emerges - the law that governs the definition of
a corporation or entity created by Congress is its legislative charter. If
the legislative enactment defines an entity as a corporation, then it is a
corporation, no matter if the Corporation Code or the Administrative
Code seemingly provides otherwise. In case of conflict between the
legislative charter of a government corporation, on one hand, and the
Corporate Code and the Administrative Code, on the other, the former
always prevails.
Majority, in Ignoring the
Legislative Charters, Effectively
Classifies Duly Established GOCCs,
With Disastrous and Far Reaching
Legal Consequences
Second, the majority claims that MIAA does not qualify either as a stock
or non-stock corporation, as defined under the Corporation Code. It
explains that the MIAA is not a stock corporation because it does not
have any capital stock divided into shares. Neither can it be considered
as a non-stock corporation because it has no members, and under
Section 87, a non-stock corporation is one where no part of its income is
distributable as dividends to its members, trustees or officers.
This formulation of course ignores Section 4 of the Corporation Code,
which again provides that corporations created by special laws or
charters shall be governed primarily by the provisions of the special law
or charter, and not the Corporation Code.
That the MIAA cannot be considered a stock corporation if only because
it does not have a stock structure is hardly a plausible proposition.
Indeed, there is no point in requiring a capital stock structure for GOCCs
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whose full ownership is limited by its charter to the State or Republic.
Such GOCCs are not empowered to declare dividends or alienate their
capital shares.
Admittedly, there are GOCCs established in such a manner, such as the
National Power Corporation (NPC), which is provided with authorized
capital stock wholly subscribed and paid for by the Government of the
Philippines, divided into shares but at the same time, is prohibited from
transferring, negotiating, pledging, mortgaging or otherwise giving
these shares as security for payment of any obligation.
64
However, based
on the Corporation Code definition relied upon by the majority, even the
NPC cannot be considered as a stock corporation. Under Section 3 of the
Corporation Code, stock corporations are defined as being "authorized
to distribute to the holders of its shares dividends or allotments of the
surplus profits on the basis of the shares held."
65
On the other hand,
Section 13 of the NPC's charter states that "the Corporation shall be non-
profit and shall devote all its returns from its capital investment, as well
as excess revenues from its operation, for expansion."
66
Can the holder of
the shares of NPC, the National Government, receive its surplus profits
on the basis of its shares held? It cannot, according to the NPC charter,
and hence, following Section 3 of the Corporation Code, the NPC is not a
stock corporation, if the majority is to be believed.
The majority likewise claims that corporations without members cannot
be deemed non-stock corporations. This would seemingly exclude
entities such as the NPC, which like MIAA, has no ostensible members.
Moreover, non-stock corporations cannot distribute any part of its
income as dividends to its members, trustees or officers. The majority
faults MIAA for remitting 20% of its gross operating income to the
national government. How about the Philippine Health Insurance
Corporation, created with the "status of a tax-exempt government
corporation attached to the Department of Health" under Rep. Act No.
7875.
67
It too cannot be considered as a stock corporation because it has
no capital stock structure. But using the criteria of the majority, it is
doubtful if it would pass muster as a non-stock corporation, since the
PHIC or Philhealth, as it is commonly known, is expressly empowered
"to collect, deposit, invest, administer and disburse" the National Health
Insurance Fund.
68
Or how about the Social Security System, which under
its revised charter, Republic Act No. 8282, is denominated as a
"corporate body."
69
The SSS has no capital stock structure, but has capital
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comprised of contributions by its members, which are eventually
remitted back to its members. Does this disqualify the SSS from
classification as a GOCC, notwithstanding this Court's previous
pronouncement in Social Security System Employees Association v.
Soriano?
70

In fact, Republic Act No. 7656, enacted in 1993, requires that all GOCCs,
whether stock or non-stock,
71
declare and remit at least fifty percent
(50%) of their annual net earnings as cash, stock or property dividends
to the National Government.
72
But according to the majority, non-stock
corporations are prohibited from declaring any part of its income as
dividends. But if Republic Act No. 7656 requires even non-stock
corporations to declare dividends from income, should it not follow that
the prohibition against declaration of dividends by non-stock
corporations under the Corporation Code does not apply to
government-owned or controlled corporations? For if not, and the
majority's illogic is pursued, Republic Act No. 7656, passed in 1993,
would be fatally flawed, as it would contravene the Administrative
Code of 1987 and the Corporation Code.
In fact, the ruinous effects of the majority's hypothesis on the nature of
GOCCs can be illustrated by Republic Act No. 7656. Following the
majority's definition of a GOCC and in accordance with Republic Act
No. 7656, here are but a few entities which are not obliged to remit fifty
(50%) of its annual net earnings to the National Government as they are
excluded from the scope of Republic Act No. 7656:
1) Philippine Ports Authority
73
- has no capital stock
74
, no members, and
obliged to apply the balance of its income or revenue at the end of each
year in a general reserve.
75

2) Bases Conversion Development Authority
76
- has no capital stock,
77
no
members.
3) Philippine Economic Zone Authority
78
- no capital stock,
79
no
members.
4) Light Rail Transit Authority
80
- no capital stock,
81
no members.
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5) Bangko Sentral ng Pilipinas
82
- no capital stock,
83
no members,
required to remit fifty percent (50%) of its net profits to the National
Treasury.
84

6) National Power Corporation
85
- has capital stock but is prohibited
from "distributing to the holders of its shares dividends or allotments of
the surplus profits on the basis of the shares held;"
86
no members.
7) Manila International Airport Authority - no capital stock
87
, no
members
88
, mandated to remit twenty percent (20%) of its annual gross
operating income to the National Treasury.
89

Thus, for the majority, the MIAA, among many others, cannot be
considered as within the coverage of Republic Act No. 7656. Apparently,
President Fidel V. Ramos disagreed. How else then could Executive
Order No. 483, signed in 1998 by President Ramos, be explained? The
issuance provides:
WHEREAS, Section 1 of Republic Act No. 7656 provides that:
"Section 1. Declaration of Policy. - It is hereby declared the policy of the
State that in order for the National Government to realize additional
revenues, government-owned and/or controlled corporations, without
impairing their viability and the purposes for which they have been
established, shall share a substantial amount of their net earnings to the
National Government."
WHEREAS, to support the viability and mandate of government-owned
and/or controlled corporations [GOCCs], the liquidity, retained
earnings position and medium-term plans and programs of these
GOCCs were considered in the determination of the reasonable
dividend rates of such corporations on their 1997 net earnings.
WHEREAS, pursuant to Section 5 of RA 7656, the Secretary of Finance
recommended the adjustment on the percentage of annual net earnings
that shall be declared by the Manila International Airport Authority
[MIAA] and Phividec Industrial Authority [PIA] in the interest of
national economy and general welfare.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Philippines,
by virtue of the powers vested in me by law, do hereby order:
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SECTION 1. The percentage of net earnings to be declared and remitted
by the MIAA and PIA as dividends to the National Government as
provided for under Section 3 of Republic Act No. 7656 is adjusted from
at least fifty percent [50%] to the rates specified hereunder:
1. Manila International Airport Authority - 35% [cash]
2. Phividec Industrial Authority - 25% [cash]
SECTION 2. The adjusted dividend rates provided for under Section 1
are only applicable on 1997 net earnings of the concerned government-
owned and/or controlled corporations.
Obviously, it was the opinion of President Ramos and the Secretary of
Finance that MIAA is a GOCC, for how else could it have come under
the coverage of Republic Act No. 7656, a law applicable only to GOCCs?
But, the majority apparently disagrees, and resultantly holds that MIAA
is not obliged to remit even the reduced rate of thirty five percent (35%)
of its net earnings to the national government, since it cannot be covered
by Republic Act No. 7656.
All this mischief because the majority would declare the Administrative
Code of 1987 and the Corporation Code as the sole sources of law
defining what a government corporation is. As I stated earlier, I find it
illogical that chartered corporations are compelled to comply with the
templates of the Corporation Code, especially when the Corporation
Code itself states that these corporations are to be governed by their own
charters. This is especially true considering that the very provision cited
by the majority, Section 87 of the Corporation Code, expressly says that
the definition provided therein is laid down "for the purposes of this
[Corporation] Code." Read in conjunction with Section 4 of the
Corporation Code which mandates that corporations created by charter
be governed by the law creating them, it is clear that contrary to the
majority, MIAA is not disqualified from classification as a non-stock
corporation by reason of Section 87, the provision not being applicable
to corporations created by special laws or charters. In fact, I see no real
impediment why the MIAA and similarly situated corporations such as
the PHIC, the SSS, the Philippine Deposit Insurance Commission, or
maybe even the NPC could at the very least, be deemed as no stock
corporations (as differentiated from non-stock corporations).
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The point, stripped to bare simplicity, is that entity created by legislative
enactment is a corporation if the legislature says so. After all, it is the
legislature that dictates what a corporation is in the first place. This is
better illustrated by another set of entities created before martial law.
These include the Mindanao Development Authority,
90
the Northern
Samar Development Authority,
91
the Ilocos Sur Development
Authority,
92
the Southeastern Samar Development Authority
93
and the
Mountain Province Development Authority.
94
An examination of the
first section of the statutes creating these entities reveal that they were
established "to foster accelerated and balanced growth" of their
respective regions, and towards such end, the charters commonly
provide that "it is recognized that a government corporation should be
created for the purpose," and accordingly, these charters "hereby created
a body corporate."
95
However, these corporations do not have capital
stock nor members, and are obliged to return the unexpended balances
of their appropriations and earnings to a revolving fund in the National
Treasury. The majority effectively declassifies these entities as GOCCs,
never mind the fact that their very charters declare them to be GOCCs.
I mention these entities not to bring an element of obscurantism into the
fray. I cite them as examples to emphasize my fundamental point that it
is the legislative charters of these entities, and not the Administrative
Code, which define the class of personality of these entities created by
Congress. To adopt the view of the majority would be, in effect, to
sanction an implied repeal of numerous congressional charters for the
purpose of declassifying GOCCs. Certainly, this could not have been the
intent of the crafters of the Administrative Code when they drafted the
"Definition of Terms" incorporated therein.
MIAA Is Without
Doubt, A GOCC
Following the charters of government corporations, there are two kinds
of GOCCs, namely: GOCCs which are stock corporations and GOCCs
which are no stock corporations (as distinguished from non-stock
corporation). Stock GOCCs are simply those which have capital stock
while no stock GOCCs are those which have no capital stock. Obviously
these definitions are different from the definitions of the terms in the
Corporation Code. Verily, GOCCs which are not incorporated with the
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Securities and Exchange Commission are not governed by the
Corporation Code but by their respective charters.
For the MIAA's part, its charter is replete with provisions that
indubitably classify it as a GOCC. Observe the following provisions
from MIAA's charter:
SECTION 3. Creation of the Manila International Airport Authority.
There is hereby established a body corporate to be known as the Manila
International Airport Authority which shall be attached to the Ministry
of Transportation and Communications. The principal office of the
Authority shall be located at the New Manila International Airport. The
Authority may establish such offices, branches, agencies or subsidiaries
as it may deem proper and necessary; Provided, That any subsidiary
that may be organized shall have the prior approval of the President.
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.
xxx
SECTION 5. Functions, Powers, and Duties. - The Authority shall have
the following functions, powers and duties:
xxx
(d) To sue and be sued in its corporate name;
(e) To adopt and use a corporate seal;
(f) To succeed by its corporate name;
(g) To adopt its by-laws, and to amend or repeal the same from time to
time;
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(h) To execute or enter into contracts of any kind or nature;
(i) To acquire, purchase, own, administer, lease, mortgage, sell or
otherwise dispose of any land, building, airport facility, or property of
whatever kind and nature, whether movable or immovable, or any
interest therein;
(j) To exercise the power of eminent domain in the pursuit of its
purposes and objectives;
xxx
(o) To exercise all the powers of a corporation under the Corporation
Law, insofar as these powers are not inconsistent with the provisions of
this Executive Order.
xxx
SECTION 16. Borrowing Power. - The Authority may, after consultation
with the Minister of Finance and with the approval of the President of
the Philippines, as recommended by the Minister of Transportation and
Communications, raise funds, either from local or international sources,
by way of loans, credits or securities, and other borrowing instruments,
with the power to create pledges, mortgages and other voluntary liens
or encumbrances on any of its assets or properties.
All loans contracted by the Authority under this Section, together with
all interests and other sums payable in respect thereof, shall constitute a
charge upon all the revenues and assets of the Authority and shall rank
equally with one another, but shall have priority over any other claim or
charge on the revenue and assets of the Authority: Provided, That this
provision shall not be construed as a prohibition or restriction on the
power of the Authority to create pledges, mortgages, and other
voluntary liens or encumbrances on any assets or property of the
Authority.
Except as expressly authorized by the President of the Philippines the
total outstanding indebtedness of the Authority in the principal amount,
in local and foreign currency, shall not at any time exceed the net worth
of the Authority at any given time.
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xxx
The President or his duly authorized representative after consultation
with the Minister of Finance may guarantee, in the name and on behalf
of the Republic of the Philippines, the payment of the loans or other
indebtedness of the Authority up to the amount herein authorized.
These cited provisions establish the fitness of MIAA to be the subject of
legal relations.
96
MIAA under its charter may acquire and possess
property, incur obligations, and bring civil or criminal actions. It has the
power to contract in its own name, and to acquire title to real or personal
property. It likewise may exercise a panoply of corporate powers and
possesses all the trappings of corporate personality, such as a corporate
name, a corporate seal and by-laws. All these are contained in MIAA's
charter which, as conceded by the Corporation Code and even the
Administrative Code, is the primary law that governs the definition and
organization of the MIAA.
In fact, MIAA itself believes that it is a GOCC represents itself as such. It
said so itself in the very first paragraph of the present petition before
this Court.
97
So does, apparently, the Department of Budget and
Management, which classifies MIAA as a "government owned &
controlled corporation" on its internet website.
98
There is also the matter
of Executive Order No. 483, which evinces the belief of the then-
president of the Philippines that MIAA is a GOCC. And the Court before
had similarly characterized MIAA as a government-owned and
controlled corporation in the earlier MIAA case, Manila International
Airport Authority v. Commission on Audit.
99

Why then the hesitance to declare MIAA a GOCC? As the majority
repeatedly asserts, it is because MIAA is actually an instrumentality. But
the very definition relied upon by the majority of an instrumentality
under the Administrative Code clearly states that a GOCC is likewise an
instrumentality or an agency. The question of whether MIAA is a GOCC
might not even be determinative of this Petition, but the effect of the
majority's disquisition on that matter may even be more destructive than
the ruling that MIAA is exempt from realty taxes. Is the majority ready
to live up to the momentous consequences of its flawed
reasoning?cralawlibrary
Novel Proviso in 1987 Constitution
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Prescribing Standards in the
Creation of GOCCs Necessarily
Applies only to GOCCs Created
After 1987.
One last point on this matter on whether MIAA is a GOCC. The majority
triumphantly points to Section 16, Article XII of the 1987 Constitution,
which mandates that the creation of GOCCs through special charters be
"in the interest of the common good and subject to the test of economic
viability." For the majority, the test of economic viability does not apply
to government entities vested with corporate powers and performing
essential public services. But this test of "economic viability" is new to
the constitutional framework. No such test was imposed in previous
Constitutions, including the 1973 Constitution which was the
fundamental law in force when the MIAA was created. How then could
the MIAA, or any GOCC created before 1987 be expected to meet this
new precondition to the creation of a GOCC? Does the dissent seriously
suggest that GOCCs created before 1987 may be declassified on account
of their failure to meet this "economic viability test"?cralawlibrary
Instrumentalities and Agencies
Also Generally Liable For
Real Property Taxes
Next, the majority, having bludgeoned its way into asserting that MIAA
is not a GOCC, then argues that MIAA is an instrumentality. It cites
incompletely, as earlier stated, the provision of Section 2(10) of the
Administrative Code. A more convincing view offered during
deliberations, but which was not adopted by the ponencia, argued that
MIAA is not an instrumentality but an agency, considering the fact that
under the Administrative Code, the MIAA is attached within the
department framework of the Department of Transportation and
Communications.
100
Interestingly, Executive Order No. 341, enacted by
President Arroyo in 2004, similarly calls MIAA an agency. Since
instrumentalities are expressly defined as "an agency not integrated
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within the department framework," that view concluded that MIAA
cannot be deemed an instrumentality.
Still, that distinction is ultimately irrelevant. Of course, as stated earlier,
the Administrative Code considers GOCCs as agencies,
101
so the fact that
MIAA is an agency does not exclude it from classification as a GOCC.
On the other hand, the majority justifies MIAA's purported exemption
on Section 133 of the Local Government Code, which similarly situates
"agencies and instrumentalities" as generally exempt from the taxation
powers of LGUs. And on this point, the majority again evades Mactan
and somehow concludes that Section 133 is the general rule,
notwithstanding Sections 232 and 234(a) of the Local Government Code.
And the majority's ultimate conclusion? "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."
102

The Court's interpretation of the Local Government Code in Mactan
renders the law integrally harmonious and gives due accord to the
respective prerogatives of the national government and LGUs. Sections
133 and 234(a) ensure that the Republic of the Philippines or its political
subdivisions shall not be subjected to any form of local government
taxation, except realty taxes if the beneficial use of the property owned
has been granted for consideration to a taxable entity or person. On the
other hand, Section 133 likewise assures that government
instrumentalities such as GOCCs may not be arbitrarily taxed by LGUs,
since they could be subjected to local taxation if there is a specific
proviso thereon in the Code. One such proviso is Section 137, which as
the Court found in National Power Corporation,
103
permits the
imposition of a franchise tax on businesses enjoying a franchise, even if
it be a GOCC such as NPC. And, as the Court acknowledged in Mactan,
Section 232 provides another exception on the taxability of
instrumentalities.
The majority abjectly refuses to engage Section 232 of the Local
Government Code although it provides the indubitable general rule that
LGUs "may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvements not hereafter specifically
exempted." The specific exemptions are provided by Section 234. Section
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232 comes sequentially after Section 133(o),
104
and even if the sequencing
is irrelevant, Section 232 would fall under the qualifying phrase of
Section 133, "Unless otherwise provided herein." It is sad, but not
surprising that the majority is not willing to consider or even discuss the
general rule, but only the exemptions under Section 133 and Section 234.
After all, if the majority is dead set in ruling for MIAA no matter what
the law says, why bother citing what the law does say.
Constitution, Laws and
Jurisprudence Have Long
Explained the Rationale
Behind the Local Taxation
Of GOCCs.
This blithe disregard of precedents, almost all of them unanimously
decided, is nowhere more evident than in the succeeding discussion of
the majority, which asserts that the power of local governments to tax
national government instrumentalities be construed strictly against local
governments. The Maceda case, decided before the Local Government
Code, is cited, as is Basco. This section of the majority employs
deliberate pretense that the Code never existed, or that the fundamentals
of local autonomy are of limited effect in our country. Why is it that the
Local Government Code is barely mentioned in this section of the
majority? Because Section 5 of the Code, purposely omitted by the
majority provides for a different rule of interpretation than that asserted:
Section 5. Rules of Interpretation. - In the interpretation of the provisions
of this Code, the following rules shall apply:
(a) Any provision on a power of a local government unit shall be
liberally interpreted in its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of powers and of the
lower local government unit. Any fair and reasonable doubt as to the
existence of the power shall be interpreted in favor of the local
government unit concerned;
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(b) In case of doubt, any tax ordinance or revenue measure shall be
construed strictly against the local government unit enacting it, and
liberally in favor of the taxpayer. Any tax exemption, incentive or relief
granted by any local government unit pursuant to the provisions of this
Code shall be construed strictly against the person claiming it; xxx
Yet the majority insists that "there is 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."
105
I wonder whether the Constitution satisfies the majority's
desire for "a sound and compelling policy." To repeat:
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local
autonomy.
xxx
Section 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to
shall accrue exclusively to the local governments.
Or how about the Local Government Code, presumably an expression of
sound and compelling policy considering that it was enacted by the
legislature, that veritable source of all statutes:
SEC. 129. Power to Create Sources of Revenue. - Each local government
unit shall exercise its power to create its own sources of revenue and to
levy taxes, fees, and charges subject to the provisions herein, consistent
shall accrue exclusively to the local government units.
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Justice Puno, in National Power Corporation v. City of
Cabanatuan,
106
provides a more "sound and compelling policy
considerations" that would warrant sustaining the taxability of
government-owned entities by local government units under the Local
Government Code.
Doubtless, the power to tax is the most effective instrument to raise
needed revenues to finance and support myriad activities of the local
government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace,
progress, and prosperity of the people. As this Court observed in the
Mactan case, "the original reasons for the withdrawal of tax exemption
privileges granted to government-owned or controlled corporations and
all other units of government were that such privilege resulted in serious
tax base erosion and distortions in the tax treatment of similarly situated
enterprises." With the added burden of devolution, it is even more
imperative for government entities to share in the requirements of
development, fiscal or otherwise, by paying taxes or other charges due
from them.
107

I dare not improve on Justice Puno's exhaustive disquisition on the
statutory and jurisprudential shift brought about the acceptance of the
principles of local autonomy:
In recent years, the increasing social challenges of the times expanded
the scope of state activity, and taxation has become a tool to realize
social justice and the equitable distribution of wealth, economic progress
and the protection of local industries as well as public welfare and
similar objectives. Taxation assumes even greater significance with the
ratification of the 1987 Constitution. Thenceforth, the power to tax is no
longer vested exclusively on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and other charges pursuant to
Article X, section 5 of the 1987 Constitution, viz:
"Section 5. Each Local Government unit shall have the power to create
its own sources of revenue, to levy taxes, fees and charges subject to
with the basic policy of local autonomy. Such taxes, fees and charges
shall accrue exclusively to the Local Governments."
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This paradigm shift results from the realization that genuine
development can be achieved only by strengthening local autonomy and
promoting decentralization of governance. For a long time, the country's
highly centralized government structure has bred a culture of
dependence among local government leaders upon the national
leadership. It has also "dampened the spirit of initiative, innovation and
imaginative resilience in matters of local development on the part of
local government leaders." 35 The only way to shatter this culture of
dependence is to give the LGUs a wider role in the delivery of basic
services, and confer them sufficient powers to generate their own
sources for the purpose. To achieve this goal, section 3 of Article X of the
1987 Constitution mandates Congress to enact a local government code
that will, consistent with the basic policy of local autonomy, set the
guidelines and limitations to this grant of taxing powers, viz:
"Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government
structure instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities, and
resources, and provide for the qualifications, election, appointment and
removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and operation
of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160, also known as
the Local Government Code of 1991 (LGC), various measures have been
enacted to promote local autonomy. These include the Barrio Charter of
1959, the Local Autonomy Act of 1959, the Decentralization Act of 1967
and the Local Government Code of 1983. Despite these initiatives,
however, the shackles of dependence on the national government
remained. Local government units were faced with the same problems
that hamper their capabilities to participate effectively in the national
development efforts, among which are: (a) inadequate tax base, (b) lack
of fiscal control over external sources of income, (c) limited authority to
prioritize and approve development projects, (d) heavy dependence on
external sources of income, and (e) limited supervisory control over
personnel of national line agencies.
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Considered as the most revolutionary piece of legislation on local
autonomy, the LGC effectively deals with the fiscal constraints faced by
LGUs. It widens the tax base of LGUs to include taxes which were
prohibited by previous laws such as the imposition of taxes on forest
products, forest concessionaires, mineral products, mining operations,
and the like. The LGC likewise provides enough flexibility to impose tax
rates in accordance with their needs and capabilities. It does not
prescribe graduated fixed rates but merely specifies the minimum and
maximum tax rates and leaves the determination of the actual rates to
the respective sanggunian.
108

And the Court's ruling through Justice Azcuna in Philippine Ports
Authority v. City of Iloilo
109
, provides especially clear and emphatic
rationale:
In closing, we reiterate that in taxing government-owned or controlled
corporations, the State ultimately suffers no loss. In National Power
Corp. v. Presiding Judge, RTC, Br. XXV, 38 we elucidated:
Actually, the State has no reason to decry the taxation of NPC's
properties, as and by way of real property taxes. Real property taxes,
after all, form part and parcel of the financing apparatus of the
Government in development and nation-building, particularly in the
local government level.
xxxxxxxxx
To all intents and purposes, real property taxes are funds taken by the
State with one hand and given to the other. In no measure can the
government be said to have lost anything.
Finally, we find it appropriate to restate that the primary reason for the
withdrawal of tax exemption privileges granted to government-owned
and controlled corporations and all other units of government was that
such privilege resulted in serious tax base erosion and distortions in the
tax treatment of similarly situated enterprises, hence resulting in the
need for these entities to share in the requirements of development,
fiscal or otherwise, by paying the taxes and other charges due from
them.
110

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How does the majority counter these seemingly valid rationales which
establish the soundness of a policy consideration subjecting national
instrumentalities to local taxation? Again, by simply ignoring that these
doctrines exist. It is unfortunate if the majority deems these cases or the
principles of devolution and local autonomy as simply too inconvenient,
and relies instead on discredited precedents. Of course, if the majority
faces the issues squarely, and expressly discusses why Basco was right
and Mactan was wrong, then this entire endeavor of the Court would be
more intellectually satisfying. But, this is not a game the majority wants
to play.
Mischaracterization of My Views on the Tax Exemption Enjoyed by the
National Government
Instead, the majority engages in an extended attack pertaining to Section
193, mischaracterizing my views on that provision as if I had been
interpreting the provision as making "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."
111

Nothing is farther from the truth. I have never advanced any theory of
the sort imputed in the majority. My main thesis on the matter merely
echoes the explicit provision of Section 193 that unless otherwise
provided in the Local Government Code (LGC) all tax exemptions
enjoyed by all persons, whether natural or juridical, including GOCCs,
were withdrawn upon the effectivity of the Code. Since the provision
speaks of withdrawal of tax exemptions of persons, it follows that the
exemptions theretofore enjoyed by MIAA which is definitely a person
are deemed withdrawn upon the advent of the Code.
On the other hand, the provision does not address the question of who
are beyond the reach of the taxing power of LGUs. In fine, the grant of
tax exemption or the withdrawal thereof assumes that the person or
entity involved is subject to tax. Thus, Section 193 does not apply to
entities which were never given any tax exemption. This would include
the national government and its political subdivisions which, as a
general rule, are not subjected to tax in the first place.
112
Corollarily, the
national government and its political subdivisions do not need tax
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exemptions. And Section 193 which ordains the withdrawal of tax
exemptions is obviously irrelevant to them.
Section 193 is in point for the disposition of this case as it forecloses
dependence for the grant of tax exemption to MIAA on Section 21 of its
charter. Even the majority should concede that the charter section is now
ineffectual, as Section 193 withdraws the tax exemptions previously
enjoyed by all juridical persons.
With Section 193 mandating the withdrawal of tax exemptions granted
to all persons upon the effectivity of the LGC, for MIAA to continue
enjoying exemption from realty tax, it will have to rely on a basis other
than Section 21 of its charter.
Lung Center of the Philippines v. Quezon City
113
provides another
illustrative example of the jurisprudential havoc wrought about by the
majority. Pursuant to its charter, the Lung Center was organized as a
trust administered by an eponymous GOCC organized with the
SEC.
114
There is no doubt it is a GOCC, even by the majority's reckoning.
Applying the Administrative Code, it is also considered as an agency,
the term encompassing even GOCCs. Yet since the Administrative Code
definition of "instrumentalities" encompasses agencies, especially those
not attached to a line department such as the Lung Center, it also
follows that the Lung Center is an instrumentality, which for the
majority is exempt from all local government taxes, especially real estate
taxes. Yet just in 2004, the Court unanimously held that the Lung Center
was not exempt from real property taxes. Can the majority and Lung
Center be reconciled? I do not see how, and no attempt is made to
demonstrate otherwise.
Another key point. The last paragraph of Section 234 specifically asserts
that any previous exemptions from realty taxes granted to or enjoyed by
all persons, including all GOCCs, are thereby withdrawn. The majority's
interpretation of Sections 133 and 234(a) however necessarily implies
that all instrumentalities, including GOCCs, can never be subjected to
real property taxation under the Code. If that is so, what then is the
sense of the last paragraph specifically withdrawing previous tax
exemptions to all persons, including GOCCs when juridical persons
such as MIAA are anyway, to his view, already exempt from such taxes
under Section 133? The majority's interpretation would effectively
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render the express and emphatic withdrawal of previous exemptions to
GOCCs inutile. Ut magis valeat quam pereat. Hence, where a statute is
susceptible of more than one interpretation, the court should adopt such
reasonable and beneficial construction which will render the provision
thereof operative and effective, as well as harmonious with each other.
115

But, the majority seems content rendering as absurd the Local
Government Code, since it does not have much use anyway for the
Code's general philosophy of fiscal autonomy, as evidently seen by the
continued reliance on Basco or Maceda. Local government rule has
never been a grant of emancipation from the national government. This
is the favorite bugaboo of the opponents of local autonomy the fallacy
that autonomy equates to independence.
Thus, the conclusion of the majority is that under Section 133(o), MIAA
as a government instrumentality is beyond the reach of local taxation
because it is not subject to taxes, fees or charges of any kind. Moreover,
the taxation of national instrumentalities and agencies by LGUs should
be strictly construed against the LGUs, citing Maceda and Basco. No
mention is made of the subsequent rejection of these cases in
jurisprudence following the Local Government Code, including Mactan.
The majority is similarly silent on the general rule under Section 232 on
real property taxation or Section 5 on the rules of construction of the
Local Government Code.
V.
MIAA, and not the National Government Is the Owner of the Subject
Taxable Properties
Section 232 of the Local Government Code explicitly provides that there
are exceptions to the general rule on rule property taxation, as "hereafter
specifically exempted." Section 234, certainly "hereafter," provides
indubitable basis for exempting entities from real property taxation. It
provides the most viable legal support for any claim that an
governmental entity such as the MIAA is exempt from real property
taxes. To repeat:
SECTION 234. Exemptions from Real Property Tax. - - The following are
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xxx
(f) Real property owned by the Republic of the Philippines or any of its
granted, for consideration or otherwise, to a taxable person:
The majority asserts that the properties owned by MIAA are owned by
the Republic of the Philippines, thus placing them under the exemption
under Section 234. To arrive at this conclusion, the majority employs
four main arguments.
MIAA Property Is Patrimonial
And Not Part of Public Dominion
The majority claims that the Airport Lands and Buildings are property
of public dominion as defined by the Civil Code, and therefore owned
by the State or the Republic of the Philippines. But as pointed out by
Justice Azcuna in the first PPA case, if indeed a property is considered
part of the public dominion, such property is "owned by the general
public and cannot be declared to be owned by a public corporation, such
as [the PPA]."
Relevant on this point are the following provisions of the MIAA charter:
Section 3. Creation of the Manila International Airport Authority. - xxx
administration of the Authority, subject to existing rights, if any. xxx
Any portion thereof shall not be disposed through sale or through any
other mode unless specifically approved by the President of the
Philippines.
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
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all equipment which are necessary for the operation of crash fire and
rescue facilities, are hereby transferred to the Authority.
Clearly, it is the MIAA, and not either the State, the Republic of the
Philippines or the national government that asserts legal title over the
Airport Lands and Buildings. There was an express transfer of
ownership between the MIAA and the national government. If the
distinction is to be blurred, as the majority does, between the
State/Republic/Government and a body corporate such as the MIAA,
then the MIAA charter showcases the remarkable absurdity of an entity
transferring property to itself.
Nothing in the Civil Code or the Constitution prohibits the State from
transferring ownership over property of public dominion to an entity
that it similarly owns. It is just like a family transferring ownership over
the properties its members own into a family corporation. The family
exercises effective control over the administration and disposition of
these properties. Yet for several purposes under the law, such as
taxation, it is the corporation that is deemed to own those properties. A
similar situation obtains with MIAA, the State, and the Airport Lands
and Buildings.
The second Public Ports Authority case, penned by Justice Callejo,
likewise lays down useful doctrines in this regard. The Court refuted the
claim that the properties of the PPA were owned by the Republic of the
Philippines, noting that PPA's charter expressly transferred ownership
over these properties to the PPA, a situation which similarly obtains
with MIAA. The Court even went as far as saying that the fact that the
PPA "had not been issued any torrens title over the port and port
facilities and appurtenances is of no legal consequence. A torrens title
does not, by itself, vest ownership; it is merely an evidence of title over
properties. xxx It has never been recognized as a mode of acquiring
ownership over real properties."
116

The Court further added:
xxx The bare fact that the port and its facilities and appurtenances are
accessible to the general public does not exempt it from the payment of
real property taxes. It must be stressed that the said port facilities and
appurtenances are the petitioner's corporate patrimonial properties, not
for public use, and that the operation of the port and its facilities and the
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administration of its buildings are in the nature of ordinary business.
The petitioner is clothed, under P.D. No. 857, with corporate status and
corporate powers in the furtherance of its proprietary interests xxx The
petitioner is even empowered to invest its funds in such government
securities approved by the Board of Directors, and derives its income
from rates, charges or fees for the use by vessels of the port premises,
appliances or equipment. xxx Clearly then, the petitioner is a profit-
earning corporation; hence, its patrimonial properties are subject to
tax.
117

There is no doubt that the properties of the MIAA, as with the PPA, are
in a sense, for public use. A similar argument was propounded by the
Light Rail Transit Authority in Light Rail Transit Authority v. Central
Board of Assessment,
118
which was cited in Philippine Ports Authority
and deserves renewed emphasis. The Light Rail Transit Authority
(LRTA), a body corporate, "provides valuable transportation facilities to
the paying public."
119
It claimed that its carriage-ways and terminal
stations are immovably attached to government-owned national roads,
and to impose real property taxes thereupon would be to impose taxes
on public roads. This view did not persuade the Court, whose decision
was penned by Justice (now Chief Justice) Panganiban. It was noted:
Though the creation of the LRTA was impelled by public service - to
provide mass transportation to alleviate the traffic and transportation
situation in Metro Manila - its operation undeniably partakes of
ordinary business. Petitioner is clothed with corporate status and
corporate powers in the furtherance of its proprietary objectives. Indeed,
it operates much like any private corporation engaged in the mass
transport industry. Given that it is engaged in a service-oriented
commercial endeavor, its carriageways and terminal stations are
patrimonial property subject to tax, notwithstanding its claim of being a
government-owned or controlled corporation.
xxx
Petitioner argues that it merely operates and maintains the LRT system,
and that the actual users of the carriageways and terminal stations are
the commuting public. It adds that the public use character of the LRT is
not negated by the fact that revenue is obtained from the latter's
operations.
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We do not agree. Unlike public roads which are open for use by
everyone, the LRT is accessible only to those who pay the required fare.
It is thus apparent that petitioner does not exist solely for public service,
and that the LRT carriageways and terminal stations are not exclusively
for public use. Although petitioner is a public utility, it is nonetheless
profit-earning. It actually uses those carriageways and terminal stations
in its public utility business and earns money therefrom.
120

xxx
Even granting that the national government indeed owns the
carriageways and terminal stations, the exemption would not apply
because their beneficial use has been granted to petitioner, a taxable
entity.
121

There is no substantial distinction between the properties held by the
PPA, the LRTA, and the MIAA. These three entities are in the business
of operating facilities that promote public transportation.
The majority further asserts that MIAA's properties, being part of the
public dominion, are outside the commerce of man. But if this is so, then
why does Section 3 of MIAA's charter authorize the President of the
Philippines to approve the sale of any of these properties? In fact, why
does MIAA's charter in the first place authorize the transfer of these
airport properties, assuming that indeed these are beyond the commerce
of man?
No Trust Has Been Created Over MIAA Properties For The Benefit of
the Republic
The majority posits that while MIAA might be holding title over the
Airport Lands and Buildings, it is holding it in trust for the Republic. A
provision of the Administrative Code is cited, but said provision does
not expressly provide that the property is held in trust. Trusts are either
express or implied, and only those situations enumerated under the
Civil Code would constitute an implied trust. MIAA does not fall within
this enumeration, and neither is there a provision in MIAA's charter
expressly stating that these properties are being held in trust. In fact,
under its charter, MIAA is obligated to retain up to eighty percent (80%)
of its gross operating income, not an inconsequential sum assuming that
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the beneficial owner of MIAA's properties is actually the Republic, and
not the MIAA.
Also, the claim that beneficial ownership over the MIAA remains with
the government and not MIAA is ultimately irrelevant. Section 234(a) of
the Local Government Code provides among those exempted from
paying real property taxes are "[r]eal property owned by the [Republic]'
except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person." In the context of Section
234(a), the identity of the beneficial owner over the properties is not
determinative as to whether the exemption avails. It is the identity of the
beneficial user of the property owned by the Republic or its political
subdivisions that is crucial, for if said beneficial user is a taxable person,
then the exemption does not lie.
I fear the majority confuses the notion of what might be construed as
"beneficial ownership" of the Republic over the properties of MIAA as
nothing more than what arises as a consequence of the fact that the
capital of MIAA is contributed by the National Government.
122
If so,
then there is no difference between the State's ownership rights over
MIAA properties than those of a majority stockholder over the
properties of a corporation. Even if such shareholder effectively owns
the corporation and controls the disposition of its assets, the personality
of the stockholder remains separately distinct from that of the
corporation. A brief recall of the entrenched rule in corporate law is in
order:
The first consequence of the doctrine of legal entity regarding the
separate identity of the corporation and its stockholders insofar as their
obligations and liabilities are concerned, is spelled out in this general
rule deeply entrenched in American jurisprudence:
Unless the liability is expressly imposed by constitutional or statutory
provisions, or by the charter, or by special agreement of the
stockholders, stockholders are not personally liable for debts of the
corporation either at law or equity. The reason is that the corporation is
a legal entity or artificial person, distinct from the members who
compose it, in their individual capacity; and when it contracts a debt, it
is the debt of the legal entity or artificial person - the corporation - and
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not the debt of the individual members. (13A Fletcher Cyc. Corp. Sec.
6213)
The entirely separate identity of the rights and remedies of a corporation
itself and its individual stockholders have been given definite
recognition for a long time. Applying said principle, the Supreme Court
declared that a corporation may not be made to answer for acts or
liabilities of its stockholders or those of legal entities to which it may be
connected, or vice versa. (Palay Inc. v. Clave et. al. 124 SCRA 638) It was
likewise declared in a similar case that a bonafide corporation should
alone be liable for corporate acts duly authorized by its officers and
directors. (Caram Jr. v. Court of Appeals et.al. 151 SCRA, p. 372)
123

It bears repeating that MIAA under its charter, is expressly conferred the
right to exercise all the powers of a corporation under the Corporation
Law, including the right to corporate succession, and the right to sue
and be sued in its corporate name.
124
The national government made a
particular choice to divest ownership and operation of the Manila
International Airport and transfer the same to such an empowered
entity due to perceived advantages. Yet such transfer cannot be deemed
consequence free merely because it was the State which contributed the
operating capital of this body corporate.
The majority claims that the transfer the assets of MIAA was meant
merely to effect a reorganization. The imputed rationale for such transfer
does not serve to militate against the legal consequences of such
assignment. Certainly, if it was intended that the transfer should be free
of consequence, then why was it effected to a body corporate, with a
distinct legal personality from that of the State or Republic? The stated
aims of the MIAA could have very well been accomplished by creating
an agency without independent juridical personality.
VI.
MIAA Performs Proprietary Functions
Nonetheless, Section 234(f) exempts properties owned by the Republic
of the Philippines or its political subdivisions from realty taxation. The
obvious question is what comprises "the Republic of the Philippines." I
think the key to understanding the scope of "the Republic" is the phrase
"political subdivisions." Under the Constitution, political subdivisions
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are defined as "the provinces, cities, municipalities and barangays."
125
In
correlation, the Administrative Code of 1987 defines "local government"
as referring to "the political subdivisions established by or in accordance
with the Constitution."
Clearly then, these political subdivisions are engaged in the exercise of
sovereign functions and are accordingly exempt. The same could be said
generally of the national government, which would be similarly exempt.
After all, even with the principle of local autonomy, it is inherently
noxious and self-defeatist for local taxation to interfere with the
sovereign exercise of functions. However, the exercise of proprietary
functions is a different matter altogether.
Sovereign and Proprietary
Functions Distinguished
Sovereign or constituent functions are those which constitute the very
bonds of society and are compulsory in nature, while ministrant or
proprietary functions are those undertaken by way of advancing the
general interests of society and are merely optional.
126
An exhaustive
discussion on the matter was provided by the Court in Bacani v.
NACOCO:
127

xxx This institution, when referring to the national government, has
reference to what our Constitution has established composed of three
great departments, the legislative, executive, and the judicial, through
which the powers and functions of government are exercised. These
functions are twofold: constituent and ministrant. The former are those
which constitute the very bonds of society and are compulsory in
nature; the latter are those that are undertaken only by way of
advancing the general interests of society, and are merely optional.
President Wilson enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons
and property from violence and robbery.
'(2) The fixing of the legal relations between man and wife and between
parents and children.
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'(3) The regulation of the holding, transmission, and interchange of
property, and the determination of its liabilities for debt or for crime.
'(4) The determination of contract rights between individuals.
'(5) The definition and punishment of crime.
'(6) The administration of justice in civil cases.
'(7) The determination of the political duties, privileges, and relations of
citizens.
'(8) Dealings of the state with foreign powers: the preservation of the
state from external danger or encroachment and the advancement of its
international interests.'" (Malcolm, The Government of the Philippine
Islands, p. 19.)
The most important of the ministrant functions are: public works, public
education, public charity, health and safety regulations, and regulations
of trade and industry. The principles determining whether or not a
government shall exercise certain of these optional functions are: (1) that
a government should do for the public welfare those things which
private capital would not naturally undertake and (2) that a government
should do these things which by its very nature it is better equipped to
administer for the public welfare than is any private individual or group
of individuals. (Malcolm, The Government of the Philippine Islands, pp.
19-20.)
From the above we may infer that, strictly speaking, there are functions
which our government is required to exercise to promote its objectives
as expressed in our Constitution and which are exercised by it as an
attribute of sovereignty, and those which it may exercise to promote
merely the welfare, progress and prosperity of the people. To this latter
class belongs the organization of those corporations owned or controlled
by the government to promote certain aspects of the economic life of our
people such as the National Coconut Corporation. These are what we
call government-owned or controlled corporations which may take on
the form of a private enterprise or one organized with powers and
formal characteristics of a private corporations under the Corporation
Law.
128

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The Court in Bacani rejected the proposition that the National Coconut
Corporation exercised sovereign functions:
Does the fact that these corporations perform certain functions of
government make them a part of the Government of the
Philippines?cralawlibrary
The answer is simple: they do not acquire that status for the simple
reason that they do not come under the classification of municipal or
public corporation. Take for instance the National Coconut Corporation.
While it was organized with the purpose of "adjusting the coconut
industry to a position independent of trade preferences in the United
States" and of providing "Facilities for the better curing of copra
products and the proper utilization of coconut by-products," a function
which our government has chosen to exercise to promote the coconut
industry, however, it was given a corporate power separate and distinct
from our government, for it was made subject to the provisions of our
Corporation Law in so far as its corporate existence and the powers that
it may exercise are concerned (sections 2 and 4, Commonwealth Act No.
518). It may sue and be sued in the same manner as any other private
corporations, and in this sense it is an entity different from our
government. As this Court has aptly said, "The mere fact that the
Government happens to be a majority stockholder does not make it a
public corporation" (National Coal Co. v. Collector of Internal Revenue,
46 Phil., 586-587). "By becoming a stockholder in the National Coal
Company, the Government divested itself of its sovereign character so
far as respects the transactions of the corporation. . . . Unlike the
Government, the corporation may be sued without its consent, and is
subject to taxation. Yet the National Coal Company remains an agency
or instrumentality of government." (Government of the Philippine
Islands v. Springer, 50 Phil., 288.)
The following restatement of the entrenched rule by former SEC
Chairperson Rosario Lopez bears noting:
The fact that government corporations are instrumentalities of the State
does not divest them with immunity from suit. (Malong v. PNR, 138
SCRA p. 63) It is settled that when the government engages in a
particular business through the instrumentality of a corporation, it
divests itself pro hoc vice of its sovereign character so as to subject itself
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to the rules governing private corporations, (PNB v. Pabolan 82 SCRA
595) and is to be treated like any other corporation. (PNR v. Union de
Maquinistas Fogonero y Motormen, 84 SCRA 223)
In the same vein, when the government becomes a stockholder in a
corporation, it does not exercise sovereignty as such. It acts merely as a
corporator and exercises no other power in the management of the
affairs of the corporation than are expressly given by the incorporating
act. Nor does the fact that the government may own all or a majority of
the capital stock take from the corporation its character as such, or make
the government the real party in interest. (Amtorg Trading Corp. v. US
71 F2d 524, 528)
129

MIAA Performs Proprietary Functions No Matter How Vital to the
Public Interest
The simple truth is that, based on these accepted doctrinal tests, MIAA
performs proprietary functions. The operation of an airport facility by
the State may be imbued with public interest, but it is by no means
indispensable or obligatory on the national government. In fact, as
demonstrated in other countries, it makes a lot of economic sense to
leave the operation of airports to the private sector.
The majority tries to becloud this issue by pointing out that the MIAA
does not compete in the marketplace as there is no competing
international airport operated by the private sector; and that MIAA
performs an essential public service as the primary domestic and
international airport of the Philippines. This premise is false, for one. On
a local scale, MIAA competes with other international airports situated
in the Philippines, such as Davao International Airport and MCIAA.
More pertinently, MIAA also competes with other international airports
in Asia, at least. International airlines take into account the quality and
conditions of various international airports in determining the number
of flights it would assign to a particular airport, or even in choosing a
hub through which destinations necessitating connecting flights would
pass through.
Even if it could be conceded that MIAA does not compete in the market
place, the example of the Philippine National Railways should be taken
into account. The PNR does not compete in the marketplace, and
performs an essential public service as the operator of the railway
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system in the Philippines. Is the PNR engaged in sovereign functions?
The Court, in Malong v. Philippine National Railways,
130
held that it was
not.
131

Even more relevant to this particular case is Teodoro v. National
Airports Corporation,
132
concerning the proper appreciation of the
functions performed by the Civil Aeronautics Administration (CAA),
which had succeeded the defunction National Airports Corporation. The
CAA claimed that as an unincorporated agency of the Republic of the
Philippines, it was incapable of suing and being sued. The Court noted:
Among the general powers of the Civil Aeronautics Administration are,
under Section 3, to execute contracts of any kind, to purchase property,
and to grant concession rights, and under Section 4, to charge landing
fees, royalties on sales to aircraft of aviation gasoline, accessories and
supplies, and rentals for the use of any property under its management.
These provisions confer upon the Civil Aeronautics Administration, in
our opinion, the power to sue and be sued. The power to sue and be
sued is implied from the power to transact private business. And if it has
the power to sue and be sued on its behalf, the Civil Aeronautics
Administration with greater reason should have the power to prosecute
and defend suits for and against the National Airports Corporation,
having acquired all the properties, funds and choses in action and
assumed all the liabilities of the latter. To deny the National Airports
Corporation's creditors access to the courts of justice against the Civil
Aeronautics Administration is to say that the government could impair
the obligation of its corporations by the simple expedient of converting
them into unincorporated agencies.
133

xxx
Eventually, the charter of the CAA was revised, and it among its
expanded functions was "[t]o administer, operate, manage, control,
maintain and develop the Manila International
Airport."
134
Notwithstanding this expansion, in the 1988 case of CAA v.
Court of Appeals
135
the Court reaffirmed the ruling that the CAA was
engaged in "private or non-governmental functions."
136
Thus, the Court
had already ruled that the predecessor agency of MIAA, the CAA was
engaged in private or non-governmental functions. These are more
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precedents ignored by the majority. The following observation from the
Teodoro case very well applies to MIAA.
The Civil Aeronautics Administration comes under the category of a
private entity. Although not a body corporate it was created, like the
National Airports Corporation, not to maintain a necessary function of
government, but to run what is essentially a business, even if revenues
be not its prime objective but rather the promotion of travel and the
convenience of the traveling public. It is engaged in an enterprise which,
far from being the exclusive prerogative of state, may, more than the
construction of public roads, be undertaken by private concerns.
137

If the determinative point in distinguishing between sovereign functions
and proprietary functions is the vitality of the public service being
performed, then it should be noted that there is no more important
public service performed than that engaged in by public utilities. But
notably, the Constitution itself authorizes private persons to exercise
these functions as it allows them to operate public utilities in this
country
138
If indeed such functions are actually sovereign and belonging
properly to the government, shouldn't it follow that the exercise of these
tasks remain within the exclusive preserve of the State?cralawlibrary
There really is no prohibition against the government taxing itself,
139
and
nothing obscene with allowing government entities exercising
proprietary functions to be taxed for the purpose of raising the coffers of
LGUs. On the other hand, it would be an even more noxious proposition
that the government or the instrumentalities that it owns are above the
law and may refuse to pay a validly imposed tax. MIAA, or any similar
entity engaged in the exercise of proprietary, and not sovereign
functions, cannot avoid the adverse-effects of tax evasion simply on the
claim that it is imbued with some of the attributes of government.
VII.
MIAA Property Not Subject to Execution Sale Without Consent Of the
President.
Despite the fact that the City of Paraaque ineluctably has the power
to impose real property taxes over the MIAA, there is an equally
relevant statutory limitation on this power that must be fully upheld.
Section 3 of the MIAA charter states that "[a]ny portion [of the [lands
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transferred, conveyed and assigned to the ownership and administration
of the MIAA] shall not be disposed through sale or through any other
mode unless specifically approved by the President of the
Philippines."
140

Nothing in the Local Government Code, even with its wide grant of
powers to LGUs, can be deemed as repealing this prohibition under
Section 3, even if it effectively forecloses one possible remedy of the
LGU in the collection of delinquent real property taxes. While the Local
Government Code withdrew all previous local tax exemptions of the
MIAA and other natural and juridical persons, it did not similarly
withdraw any previously enacted prohibitions on properties owned by
GOCCs, agencies or instrumentalities. Moreover, the resulting legal
effect, subjecting on one hand the MIAA to local taxes but on the other
hand shielding its properties from any form of sale or disposition, is not
contradictory or paradoxical, onerous as its effect may be on the LGU. It
simply means that the LGU has to find another way to collect the taxes
due from MIAA, thus paving the way for a mutually acceptable
negotiated solution.
141

There are several other reasons this statutory limitation should be
upheld and applied to this case. It is at this juncture that the importance
of the Manila Airport to our national life and commerce may be
accorded proper consideration. The closure of the airport, even by
reason of MIAA's legal omission to pay its taxes, will have an injurious
effect to our national economy, which is ever reliant on air travel and
traffic. The same effect would obtain if ownership and administration of
the airport were to be transferred to an LGU or some other entity which
were not specifically chartered or tasked to perform such vital function.
It is for this reason that the MIAA charter specifically forbids the sale or
disposition of MIAA properties without the consent of the President.
The prohibition prevents the peremptory closure of the MIAA or the
hampering of its operations on account of the demands of its creditors.
The airport is important enough to be sheltered by legislation from
ordinary legal processes.
Section 3 of the MIAA charter may also be appreciated as within the
proper exercise of executive control by the President over the MIAA, a
GOCC which despite its separate legal personality, is still subsumed
within the executive branch of government. The power of executive
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control by the President should be upheld so long as such exercise does
not contravene the Constitution or the law, the President having the
corollary duty to faithfully execute the Constitution and the laws of the
land.
142
In this case, the exercise of executive control is precisely
recognized and authorized by the legislature, and it should be upheld
even if it comes at the expense of limiting the power of local government
units to collect real property taxes.
Had this petition been denied instead with Mactan as basis, but with the
caveat that the MIAA properties could not be subject of execution sale
without the consent of the President, I suspect that the parties would feel
little distress. Through such action, both the Local Government Code
and the MIAA charter would have been upheld. The prerogatives of
LGUs in real property taxation, as guaranteed by the Local Government
Code, would have been preserved, yet the concerns about the ruinous
effects of having to close the Manila International Airport would have
been averted. The parties would then be compelled to try harder at
working out a compromise, a task, if I might add, they are all too willing
to engage in.
143
Unfortunately, the majority will cause precisely the
opposite result of unremitting hostility, not only to the City of
Paraaque, but to the thousands of LGUs in the country.
VIII.
Summary of Points
My points may be summarized as follows:
1) Mactan and a long line of succeeding cases have already settled the
rule that under the Local Government Code, enacted pursuant to the
constitutional mandate of local autonomy, all natural and juridical
persons, even those GOCCs, instrumentalities and agencies, are no
longer exempt from local taxes even if previously granted an exemption.
The only exemptions from local taxes are those specifically provided
under the Local Government Code itself, or those enacted through
subsequent legislation.
2) Under the Local Government Code, particularly Section 232,
instrumentalities, agencies and GOCCs are generally liable for real
property taxes. The only exemptions therefrom under the same Code are
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provided in Section 234, which include real property owned by the
Republic of the Philippines or any of its political subdivisions.
3) The subject properties are owned by MIAA, a GOCC, holding title in
its own name. MIAA, a separate legal entity from the Republic of the
Philippines, is the legal owner of the properties, and is thus liable for
real property taxes, as it does not fall within the exemptions under
Section 234 of the Local Government Code.
4) The MIAA charter expressly bars the sale or disposition of MIAA
properties. As a result, the City of Paraaque is prohibited from
seizing or selling these properties by public auction in order to satisfy
MIAA's tax liability. In the end, MIAA is encumbered only by a limited
lien possessed by the City of Paraaque.
On the other hand, the majority's flaws are summarized as follows:
1) The majority deliberately ignores all precedents which run counter to
its hypothesis, including Mactan. Instead, it relies and directly cites
those doctrines and precedents which were overturned by Mactan. By
imposing a different result than that warranted by the precedents
without explaining why Mactan or the other precedents are wrong, the
majority attempts to overturn all these ruling sub silencio and without
legal justification, in a manner that is not sanctioned by the practices and
traditions of this Court.
2) The majority deliberately ignores the policy and philosophy of local
fiscal autonomy, as mandated by the Constitution, enacted under the
Local Government Code, and affirmed by precedents. Instead, the
majority asserts that there is no sound rationale for local governments to
tax national government instrumentalities, despite the blunt existence of
such rationales in the Constitution, the Local Government Code, and
precedents.
3) The majority, in a needless effort to justify itself, adopts an extremely
strained exaltation of the Administrative Code above and beyond the
Corporation Code and the various legislative charters, in order to
impose a wholly absurd definition of GOCCs that effectively declassifies
innumerable existing GOCCs, to catastrophic legal consequences.
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4) The majority asserts that by virtue of Section 133(o) of the Local
Government Code, all national government agencies and
instrumentalities are exempt from any form of local taxation, in
contravention of several precedents to the contrary and the proviso
under Section 133, "unless otherwise provided herein [the Local
Government Code]."
5) The majority erroneously argues that MIAA holds its properties in
trust for the Republic of the Philippines, and that such properties are
patrimonial in character. No express or implied trust has been created to
benefit the national government. The legal distinction between
sovereign and proprietary functions, as affirmed by jurisprudence,
likewise preclude the classification of MIAA properties as patrimonial.
IX.
Epilogue
If my previous discussion still fails to convince on how wrong the
majority is, then the following points are well-worth considering. The
majority cites the Bangko Sentral ng Pilipinas (Bangko Sentral) as a
government instrumentality that exercises corporate powers but not
organized as a stock or non-stock corporation. Correspondingly for the
majority, the Bangko ng Sentral is exempt from all forms of local
taxation by LGUs by virtue of the Local Government Code.
Section 125 of Rep. Act No. 7653, The New Central Bank Act, states:
SECTION 125. Tax Exemptions. - The Bangko Sentral shall be exempt for
a period of five (5) years from the approval of this Act from all national,
provincial, municipal and city taxes, fees, charges and assessments.
The New Central Bank Act was promulgated after the Local
Government Code if the BSP is already preternaturally exempt from
local taxation owing to its personality as an "government
instrumentality," why then the need to make a new grant of exemption,
which if the majority is to be believed, is actually a redundancy. But
even more tellingly, does not this provision evince a clear intent that
after the lapse of five (5) years, that the Bangko Sentral will be liable for
provincial, municipal and city taxes? This is the clear congressional
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intent, and it is Congress, not this Court which dictates which entities
are subject to taxation and which are exempt.
Perhaps this notion will offend the majority, because the Bangko Sentral
is not even a government owned corporation, but a government
instrumentality, or perhaps "loosely", a "government corporate entity."
How could such an entity like the Bangko Sentral, which is not even a
government owned corporation, be subjected to local taxation like any
mere mortal? But then, see Section 1 of the New Central Bank Act:
SECTION 1. Declaration of Policy. - The State shall maintain a central
monetary authority that shall function and operate as an independent
and accountable body corporate in the discharge of its mandated
responsibilities concerning money, banking and credit. In line with this
policy, and considering its unique functions and responsibilities, the
central monetary authority established under this Act, while being a
government-owned corporation, shall enjoy fiscal and administrative
autonomy.
Apparently, the clear legislative intent was to create a government
corporation known as the Bangko Sentral ng Pilipinas. But this
legislative intent, the sort that is evident from the text of the provision
and not the one that needs to be unearthed from the bowels of the
archival offices of the House and the Senate, is for naught to the
majority, as it contravenes the Administrative Code of 1987, which after
all, is "the governing law defining the status and relationship of
government agencies and instrumentalities" and thus superior to the
legislative charter in determining the personality of a chartered entity.
Its like saying that the architect who designed a school building is better
equipped to teach than the professor because at least the architect is
familiar with the geometry of the classroom.
Consider further the example of the Philippine Institute of Traditional
and Alternative Health Care (PITAHC), created by Republic Act No.
8243 in 1997. It has similar characteristics as MIAA in that it is
established as a body corporate,
144
and empowered with the attributes of
a corporation,
145
including the power to purchase or acquire real
properties.
146
However the PITAHC has no capital stock and no
members, thus following the majority, it is not a GOCC.
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The state policy that guides PITAHC is the development of traditional
and alternative health care,
147
and its objectives include the promotion
and advocacy of alternative, preventive and curative health care
modalities that have been proven safe, effective and cost
effective.
148
"Alternative health care modalities" include "other forms of
non-allophatic, occasionally non-indigenous or imported healing
methods" which include, among others "reflexology, acupuncture,
massage, acupressure" and chiropractics.
149

Given these premises, there is no impediment for the PITAHC to
purchase land and construct thereupon a massage parlor that would
provide a cheaper alternative to the opulent spas that have proliferated
around the metropolis. Such activity is in line with the purpose of the
PITAHC and with state policy. Is such massage parlor exempt from
realty taxes? For the majority, it is, for PITAHC is an instrumentality or
agency exempt from local government taxation, which does not fall
under the exceptions under Section 234 of the Local Government Code.
Hence, this massage parlor would not just be a shelter for frazzled
nerves, but for taxes as well.
Ridiculous? One might say, certainly a decision of the Supreme Court
cannot be construed to promote an absurdity. But precisely the majority,
and the faulty reasoning it utilizes, opens itself up to all sorts of
mischief, and certainly, a tax-exempt massage parlor is one of the lesser
evils that could arise from the majority ruling. This is indeed a very
strange and very wrong decision.
I dissent.

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Classification of Property Full Text Cases

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CASES PROPERTY CLASS 1415

CLASSIFICATION OF PROPERTY FULL TEXT

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