TAXATION-27-32 Cases Not Yet Digested

EN BANC
MANILA INTERNATIONAL G.R. No. 155650

AIRPORT AUTHORITY,
Petitioner, Present:
PANGANIBAN, C.J.,
PUNO,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
- versus - CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
COURT OF APPEALS, CITY OF TINGA,
PARAAQUE, CITY MAYOR OF CHICO-NAZARIO,

PARAAQUE, SANGGUNIANG GARCIA, and
PANGLUNGSOD NG PARAAQUE, VELASCO, JR., JJ.
CITY ASSESSOR OF PARAAQUE,

and CITY TREASURER OF Promulgated:
PARAAQUE,
Respondents. July 20, 2006
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----------x
D E C I S I ON
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 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. MIAAs real estate tax delinquency
is broken down as follows:
TAX DECLARATION TAXABLEYEAR 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 P392,435,861.95 P232,070,863.47 P 624,506,725.42
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.
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 MIAAs 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 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 corporationsupon the
effectivity of the Local Government Code. Respondents also argue
that a basic rule of statutory construction is that the express
mention of one person, thing, or act excludes all others. An
international airport is not among the exceptions mentioned in
Section 193 of the Local Government Code. Thus, respondents
assert that MIAA cannot claim that the Airport Lands and
Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court

in Mactan International Airport v. Marcos where we held
[8]
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 Courts Ruling
We rule that MIAAs 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 Provisions of the Administrative Code of
1987 defines a government-owned or controlled corporation as
follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any

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

be organized as a stock or non-stock corporation. MIAA is
not organized as a stock or non-stock corporation.MIAA is not a
stock corporation because it has no capital stock divided into
shares. MIAA has no stockholders or voting shares. Section 10 of
the MIAA 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.
Clearly, under its Charter, MIAA does not have capital stock that
is divided into shares.
Section 3 of the Corporation Code[10] defines a stock

corporation as one whose capital stock is divided into shares
and x x x authorized to distribute to the holders of such
shares dividends x x x. MIAA has capital but it is not divided
into shares of stock. MIAA has no stockholders or voting
shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has

no members. Section 87 of the Corporation Code defines a
non-stock corporation as one where no part of its income is
distributable as dividends to its members, trustees or
officers. A non-stock corporation must have members. Even if
we assume that the Government is considered as the sole
member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part
of their income to their members. Section 11 of the MIAA
Charter mandates MIAA to remit 20% of its annual gross
operating income to the National Treasury.[11] This prevents
MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-

stock corporations are organized for charitable, religious,
educational, professional, cultural, recreational, fraternal,
literary, scientific, social, civil service, or similar purposes, like
trade, industry, agriculture and like chambers. MIAA is not
organized for any of these purposes. MIAA, a public utility, is
organized to operate an international and domestic airport for
public use.
Since MIAA is neither a stock nor a non-stock corporation,

MIAA does not qualify as a government-owned or controlled
corporation. What then is the legal status of MIAA within the
National Government?
MIAA is a government instrumentality vested with
corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality, the
only difference is that MIAA is vested with corporate
powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government instrumentality as
follows:
(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)
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
Administrative Code, which is the governing law defining the legal
relationship and status of government entities.
A government instrumentality like MIAA falls under

Section 133(o) of the Local Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local

Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:
xxxx
(o) Taxes, fees or charges of any kind on the

National Government, its agencies and instrumentalities and
local government units. (Emphasis and underscoring supplied)
Section 133(o) recognizes the basic principle that local

governments cannot tax the national government, which
historically merely delegated to local governments the power to
tax. While the 1987 Constitution now includes taxation as one of
the powers of local governments, local governments may only
exercise such power subject to such guidelines and limitations as
the Congress may provide.[18]
When local governments invoke the power to tax on

national government instrumentalities, such power is construed
strictly against local governments. The rule is that a tax is
never presumed and there must be clear language in the law
imposing the tax. Any doubt whether a person, article or
activity is taxable is resolved against taxation. This rule applies
with greater force when local governments seek to tax national
government instrumentalities.
Another rule is that a tax exemption is strictly construed

against the taxpayer claiming the exemption. However, when
Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed
liberally in favor of the national government instrumentality. As
this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions
running to the benefit of the government itself or its agencies. In such
case the practical effect of an exemption is merely to reduce the
amount of money that has to be handled by government in the course
of its operations. For these reasons, provisions granting exemptions to
government agencies may be construed liberally, in favor of non tax-
liability of such agencies.[19]
There is, moreover, no point in national and local governments

taxing each other, unless a sound and compelling policy requires
such transfer of public funds from one government pocket to
another.
There is also no reason for local governments to tax national

government instrumentalities for rendering essential public
services to inhabitants of local governments. The only
exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential
public services for sound and compelling policy
considerations. There must be express language in the law
empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is
resolved against local governments.
Thus, Section 133 of the Local Government Code states

that unless otherwise provided in the Code, local governments
cannot tax national government instrumentalities.As this Court
held in Basco v. Philippine Amusements and Gaming
Corporation:
The states have no power by taxation or
otherwise, to retard, impede, burden or in any
manner control the operation of constitutional laws
enacted by Congress to carry into execution the
powers vested in the federal government.
(MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the supremacy of the National

Government over local governments.
Justice Holmes, speaking for the Supreme Court,

made reference to the entire absence of power on the
part of the States to touch, in that way (taxation) at
least, the instrumentalities of the United States (Johnson
v. Maryland, 254 US 51) and it can be agreed that no
state or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them.
(Antieau, Modern Constitutional Law, Vol. 2, p. 140,
emphasis supplied)
Otherwise, mere creatures of the State can defeat National

policies thru extermination of what local authorities may perceive to be
undesirable activities or enterprise using the power to tax as a tool for
regulation (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the

power to destroy (Mc Culloch v. Maryland, supra) cannot be allowed to
defeat an instrumentality or creation of the very entity which has the
inherent power to wield it. [20]
2. Airport Lands and Buildings of MIAA are Owned by the
Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property

of public dominion and therefore owned by the State or the
Republic of the Philippines. The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private

ownership.
ARTICLE 420. The following things are property of public

dominion:
(1) Those intended for public use, such as roads, canals,

rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public
use, and are intended for some public service or for the development
of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer
intended for public use or for public service, shall form part of the
patrimonial property of the State.
No one can dispute that properties of public dominion

mentioned in Article 420 of the Civil Code, like roads, canals,
rivers, torrents, ports and bridges constructed by the
State, are owned by the State. The term ports includes
seaports and airports. The MIAA Airport Lands and Buildings
constitute a port constructed by the State. Under Article 420 of
the Civil Code, the MIAA Airport Lands and Buildings are
properties of public dominion and thus owned by the State or the
Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use

because they are used by the public for international and
domestic travel and transportation. The fact that the MIAA
collects terminal fees and other charges from the public does not
remove the character of the Airport Lands and Buildings as
properties for public use. The operation by the government of
a tollway does not change the character of the road as one for
public use. Someone must pay for the maintenance of the road,
either the public indirectly through the taxes they pay the
government, or only those among the public who actually use the
road through the toll fees they pay upon using the
road. The tollway system is even a more efficient and equitable
manner of taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the
character of the property whether it is of public dominion or
not. Article 420 of the Civil Code defines property of public
dominion as one intended for public use. Even if the
government collects toll fees, the road is still intended for
public use if anyone can use the road under the same terms
and conditions as the rest of the public. The charging of fees,
the limitation on the kind of vehicles that can use the road, the
speed restrictions and other conditions for the use of the road
do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the

landing fees MIAA charges to airlines, constitute the bulk of the
income that maintains the operations of MIAA.The collection of
such fees does not change the character of MIAA as an airport for
public use. Such fees are often termed users 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 users tax is more equitable a principle
of taxation mandated in the 1987 Constitution.[21]
The Airport Lands and Buildings of MIAA, which its Charter calls
the principal airport of the Philippines for both international and
domestic air traffic,[22] are properties of public dominion because
they are intended for public use. As properties of public
dominion, they indisputably belong to the State or the
Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce
of Man
The Airport Lands and Buildings of MIAA are devoted to

public use and thus are properties of public dominion. As
properties of public dominion, the Airport Landsand
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 leased by the municipality to private parties. While
in case of war or during an emergency, town plazas may be occupied
temporarily by private individuals, as was done and as was tolerated
by the Municipality of Pozorrubio, when the emergency has ceased,
said temporary occupation or use must also cease, and the town
officials should see to it that the town plazas should ever be kept open
to the public and free from encumbrances or illegal private
constructions.[24] (Emphasis supplied)
The Court has also ruled that property of public dominion, being
outside the commerce of man, cannot be the subject of an
auction sale.[25]
Properties of public dominion, being for public use, are

not subject to levy, encumbrance or disposition through public
or private sale. Any encumbrance, levy on execution or auction
sale of any property of public dominion is void for being
contrary to public policy. Essential public services will stop if
properties of public dominion are subject to encumbrances,
foreclosures and auction sale. This will happen if the City
of 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 mens village and other
improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the

provisions of Section eighty-three shall be non-alienable and
shall not be subject to occupation, entry, sale, lease, or other
disposition until again declared alienable under the provisions
of this Act or by proclamation of the President. (Emphasis and
underscoring supplied)
Thus, unless the President issues a proclamation withdrawing

the Airport Lands and Buildings from public use, these properties
remain properties of public dominion and are inalienable. Since
the Airport Lands and Buildings are inalienable in their present
status as properties of public dominion, they are not subject to
levy on execution or foreclosure sale. As long as
the Airport Lands and Buildings are reserved for public use, their
ownership remains with the State or the Republic of
the Philippines.
The authority of the President to reserve lands of the

public domain for public use, and to withdraw such public use,
is reiterated in Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private

Domain of the Government. (1) The President shall have the
power to reserve for settlement or public use, and for specific
public purposes, any of the lands of the public domain, the use
of which is not otherwise directed by law. The reserved land
shall thereafter remain subject to the specific public purpose
indicated until otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and

Buildings are withdrawn by law or presidential proclamation from
public use, they are properties of public dominion, owned by the
Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and
Buildings in trust for the Republic. Section 48, Chapter 12, Book I
of the Administrative Code allows instrumentalities like
MIAA to hold title to real properties owned by the
Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever

real property of the Government is authorized by law to be conveyed,
the deed of conveyance shall be executed in behalf of the government
by the following:
(1) For property belonging to and titled in the name of the

Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of

the Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by
the executive head of the agency or instrumentality. (Emphasis
supplied)
In MIAAs case, its status as a mere trustee of

the Airport Lands and Buildings is clearer because even its
executive head cannot sign the deed of conveyance on behalf of
the Republic. Only the President of the Republic can sign such
deed of conveyance.[28]
d. Transfer to MIAA was Meant to Implement a
Reorganization
The MIAA Charter, which is a law, transferred to MIAA the

title to the Airport Lands and Buildings from the Bureau of Air
Transportation of the Department of Transportation and
Communications. The MIAA Charter provides:
SECTION 3. Creation of
the Manila International Airport Authority. x x x x
The land where the Airport is presently located as well as

the surrounding land area of approximately six hundred
hectares, are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to
existing rights, if any. The Bureau of Lands and other appropriate
government agencies shall undertake an actual survey of the area
transferred within one year from the promulgation of this Executive
Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through
sale or through any other mode unless specifically approved by
the President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible

Assets. All existing public airport facilities, runways, lands,
buildings and other property, movable or immovable, belonging to
the Airport, and all assets, powers, rights, interests and
privileges belonging to the Bureau of Air Transportation relating
to airport works or air operations, including all equipment which are
necessary for the operation of crash fire and rescue facilities, are
hereby transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a

Division in the Bureau of Air Transportation and Transitory
Provisions. The Manila International Airport including
the Manila Domestic Airport as a division under the Bureau of Air
Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to

MIAA without the Republic receiving cash, promissory notes or
even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for
the transfer of the Airport Lands and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal

airport of the Philippines for both international and domestic air
traffic, is required to provide standards of airport
accommodation and service comparable with the best airports in
the world;
WHEREAS, domestic and other terminals, general aviation and other

facilities, have to be upgraded to meet the current and future air traffic
and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated

that the objectives of providing high standards of
accommodation and service within the context of a financially
viable operation, will best be achieved by a separate and
autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by

Presidential Decree No. 1772, the President of the Philippines is given
continuing authority to reorganize the National Government,
which authority includes the creation of new entities, agencies
and instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the

Bureau of Air Transportation to MIAA was not meant to transfer
beneficial ownership of these assets from the Republic to
MIAA. The purpose was merely to reorganize a division in the
Bureau of Air Transportation into a separate and
autonomous body. The Republic remains the beneficial owner of
the Airport Lands and Buildings. MIAA itself is owned solely by
the Republic. No party claims any ownership rights
over MIAAs 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 exempted from payment of the real property tax:
(a) Real property owned by the Republic of the

Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section

133(o) of the same Code, which prohibits local governments
from imposing [t]axes, fees or charges of any kind on the
National Government, its agencies
and instrumentalities x x x. The real properties owned by the
Republic are titled either in the name of the Republic itself or in
the name of agencies or instrumentalities of the National
Government. The Administrative Code allows real property
owned by the Republic to be titled in the name of agencies or
instrumentalities of the national government. Such real
properties remain owned by the Republic and continue to be
exempt from real estate tax.
The Republic may grant the beneficial use of its real

property to an agency or instrumentality of the national
government. This happens when title of the real property is
transferred to an agency or instrumentality even as the Republic
remains the owner of the real property. Such arrangement does
not result in the loss of the tax exemption. Section 234(a) of the
Local Government Code states that real property owned by the
Republic loses its tax exemption only if the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable
person. MIAA, as a government instrumentality, is not a taxable
person under Section 133(o) of the Local Government
Code. Thus, even if we assume that the Republic has granted to
MIAA the beneficial use of the Airport Lands and Buildings, such
fact does not make these real properties subject to real estate
tax.
However, portions of the Airport Lands and Buildings that

MIAA leases to private entities are not exempt from real estate
tax. For example, the land area occupied by hangars that MIAA
leases to private corporations is subject to real estate tax. In
such a case, MIAA has granted the beneficial use of such land
area for a consideration to a taxable person and therefore such
land area is subject to real estate tax. In Lung Center of the
Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to

private entities as well as those parts of the hospital leased to private
individuals are not exempt from such taxes. On the other hand, the
portions of the land occupied by the hospital and portions of the
hospital used for its patients, whether paying or non-paying, are
exempt from real property taxes.[29]
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real
estate tax because Section 193 of the Local Government Code of
1991 withdrew the tax exemption of all persons, whether
natural or juridical upon the effectivity of the Code. Section
193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless

otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural
or juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational
institutions are hereby withdrawn upon effectivity of this
Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical

person. The minority argues that since the Local Government
Code withdrew the tax exemption of all juridical persons, then
MIAA is not exempt from real estate tax. Thus, the minority
declares:
It is evident from the quoted provisions of the Local

Government Code that the withdrawn exemptions from realty
tax cover not just GOCCs, but all persons. To repeat, the
provisions lay down the explicit proposition that the withdrawal of
realty tax exemption applies to all persons. The reference to or the
inclusion of GOCCs is only clarificatory or illustrative of the explicit
provision.
The term All persons encompasses the two classes of

persons recognized under our laws, natural and juridical
persons. Obviously, MIAA is not a natural person. Thus, the
determinative test is not just whether MIAA is a GOCC, but
whether MIAA is a juridical person at all. (Emphasis and
underscoring in the original)
The minority posits that the determinative test whether

MIAA is exempt from local taxation is its status whether MIAA
is a juridical person or not. The minority also insists
that Sections 193 and 234 may be examined in isolation
from Section 133(o) to ascertain MIAAs 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]nlessotherwise provided
in this Code. Now, Section 133(o) of the Local Government
Code expressly provides otherwise,
specifically prohibiting local governments from imposing any
kind of tax on national government instrumentalities. Section
133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of

Local Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National
Government, its agencies and instrumentalities, and local
government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local

governments cannot impose any kind of tax on national
government instrumentalities like the MIAA. Local governments
are devoid of power to tax the national government, its
agencies and instrumentalities. The taxing powers of local
governments do not extend to the national government, its
agencies and instrumentalities, [u]nless otherwise provided in
this Code as stated in the saving clause of Section 133. The
saving clause refers to Section 234(a) on the exception to the
exemption from real estate tax of real property owned by the
Republic.
The minority, however, theorizes that unless exempted in

Section 193 itself, all juridical persons are subject to tax by
local governments. The minority insists that the juridical
persons exempt from local taxation are limited to the three
classes of entities specifically enumerated as exempt in
Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local

water districts; (b) cooperatives duly registered under Republic
Act No. 6938; and (c) non-stock and non-profit hospitals and
educational institutions. It would be belaboring the obvious why the
MIAA does not fall within any of the exempt entities under Section
193. (Emphasis supplied)
The minoritys 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 minoritys 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 minoritys theory violates Section 133(o) of the Local

Government Code which expressly prohibits local governments
from imposing any kind of tax on national government
instrumentalities. Section 133(o) does not distinguish
between national government instrumentalities with or
without juridical personalities. Where the law does not
distinguish, courts should not distinguish. Thus, Section 133(o)
applies to all national government instrumentalities, with or
without juridical personalities. The determinative test whether
MIAA is exempt from local taxation is not whether MIAA is a
juridical person, but whether it is a national government
instrumentality under Section 133(o) of the Local Government
Code. Section 133(o) is the specific provision of law prohibiting
local governments from imposing any kind of tax on the national
government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving
clause [u]nless otherwise provided in this Code. This means
that unless the Local Government Code grants an express
authorization, local governments have no power to tax the
national government, its agencies and instrumentalities. Clearly,
the rule is local governments have no power to tax the national
government, its agencies and instrumentalities. As an exception
to this rule, local governments may tax the national government,
its agencies and instrumentalitiesonly if the Local Government
Code expressly so provides.
The saving clause in Section 133 refers to the exception to

the exemption in Section 234(a) of the Code, which makes the
national government subject to real estate tax when it gives
the beneficial use of its real properties to a taxable
entity. Section 234(a) of the Local Government Code provides:
SEC. 234. Exemptions from Real Property Tax The following

are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the

Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is

exempt from real estate tax. The exception to this
exemption is when the government gives the beneficial use of
the real property to a taxable entity.
The exception to the exemption in Section 234(a) is

the only instance when the national government, its
agencies and instrumentalities are subject to any kind of
tax by local governments. The exception to the exemption
applies only to real estate tax and not to any other tax. The
justification for the exception to the exemption is that the real
property, although owned by the Republic, is not devoted to
public use or public service but devoted to the private gain of a
taxable person.
The minority also argues that since Section

133 precedes Section 193 and 234 of the Local Government
Code, the later provisions prevail over Section 133. Thus, the
minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and

234. Following an accepted rule of construction, in case of conflict
the subsequent provisions should prevail. Therefore, MIAA, as a
juridical person, is subject to real property taxes, the general
exemptions attaching to instrumentalities under Section 133(o) of the
Local Government Code being qualified by Sections 193 and 234 of the
same law. (Emphasis supplied)
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 presented a persuasive argument that there is
such a conflict. The minoritys assumption of an irreconcilable
conflict in the statutory provisions is an egregious error for two
reasons.
First, there is no conflict whatsoever between Sections 133

and 193 because Section 193 expressly admits its
subordination to other provisions of the Code when Section
193 states [u]nless otherwise provided in this Code. By its
own words, Section 193 admits the superiority of other
provisions of the Local Government Code that limit the exercise of
the taxing power in Section 193. When a provision of law grants a
power but withholds such power on certain matters, there is no
conflict between the grant of power and the withholding of
power. The grantee of the power simply cannot exercise the
power on matters withheld from its power.
Second, Section 133 is entitled Common Limitations on the

Taxing Powers of Local Government Units. Section 133 limits
the grant to local governments of the power to tax, and not
merely the exercise of a delegated power to tax. Section 133
states that the taxing powers of local governments shall not
extend to the levy of any kind of tax on the national
government, its agencies and instrumentalities. There is no
clearer limitation on the taxing power than this.
Since Section 133 prescribes the common limitations on

the taxing powers of local governments, Section 133 logically
prevails over Section 193 which grants local governments such
taxing powers. By their very meaning and purpose, the
common limitations on the taxing power prevail over the
grant or exercise of the taxing power.If the taxing power of
local governments in Section 193 prevails over the limitations on
such taxing power in Section 133, then local governments can
impose any kind of tax on the national government, its agencies
and instrumentalities a gross absurdity.
Local governments have no power to tax the national

government, its agencies and instrumentalities, except as
otherwise provided in the Local Government Code pursuant to
the saving clause in Section 133 stating [u]nless otherwise
provided in this Code. This exception which is an exception to
the exemption of the Republic from real estate tax imposed by
local governments refers to Section 234(a) of the Code. The
exception to the exemption in Section 234(a) subjects real
property owned by the Republic, whether titled in the name of
the national government, its agencies or instrumentalities, to
real estate tax if the beneficial use of such property is given to
a taxable entity.
The minority also claims that the definition in the Administrative

Code of the phrase government-owned or controlled corporation
is not controlling. The minority points out that Section 2 of the
Introductory Provisions of the Administrative Code admits that its
definitions are not controlling when it provides:
SEC. 2. General Terms Defined. Unless the specific words of the

text, or the context as a whole, or a particular statute, shall require a
different meaning:
xxxx
The minority then concludes that reliance on the Administrative

Code definition is flawed.
The minoritys argument is a non sequitur. True, Section 2 of the

Administrative Code recognizes that a statute may require a
different meaning than that defined in the Administrative
Code. However, this does not automatically mean that the
definition in the Administrative Code does not apply to the Local
Government Code. Section 2 of the Administrative Code clearly
states that unless the specific words x x x of a particular
statute shall require a different meaning, the definition in
Section 2 of the Administrative Code shall apply. Thus, unless
there is specific language in the Local Government Code defining
the phrase government-owned or controlled corporation
differently from the definition in the Administrative Code, the
definition in the Administrative Code prevails.
The minority does not point to any provision in the Local

Government Code defining the phrase government-owned or
controlled corporation differently from the definition in the
Administrative Code. Indeed, there is none. The Local
Government Code is silent on the definition of the phrase
government-owned or controlled corporation. The
Administrative Code, however, expressly defines the phrase
government-owned or controlled corporation. The inescapable
conclusion is that the Administrative Code definition of the phrase
government-owned or controlled corporation applies to the Local
Government Code.
The third whereas clause of the Administrative Code states that
the Code incorporates in a unified document the major
structural, functional and procedural principles and rules
of governance. Thus, the Administrative Code is the governing
law defining the status and relationship of government
departments, bureaus, offices, agencies and
instrumentalities. Unless a statute expressly provides for a
different status and relationship for a specific government unit or
entity, the provisions of the Administrative Code prevail.
The minority also contends that the phrase government-owned or

controlled corporation should apply only to corporations organized
under the Corporation Code, the general incorporation law, and
not to corporations created by special charters. The minority sees
no reason why government corporations with special charters
should have a capital stock.Thus, the minority declares:
I submit that the definition of government-owned or controlled

corporations under the Administrative Code refer to those corporations
owned by the government or its instrumentalities which are created
not by legislative enactment, but formed and organized under the
Corporation Code through registration with the Securities and
Exchange Commission. In short, these are GOCCs without original
charters.
xxxx
It might as well be worth pointing out that there is no point in

requiring a capital structure for GOCCs whose full ownership is limited
by its charter to the State or Republic. Such GOCCs are not
empowered to declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in
accord with the Constitution and existing legislations. It will also
result in gross absurdities.
First, the Administrative Code definition of the phrase

government-owned or controlled corporation does not distinguish
between one incorporated under the Corporation Code or under a
special charter. Where the law does not distinguish, courts should
not distinguish.
Second, Congress has created through special charters several

government-owned corporations organized as stock
corporations. Prime examples are the Land Bank of
the Philippines and the Development Bank of the Philippines. The
special charter[40] of the Land Bank of the Philippines provides:
SECTION 81. Capital. The authorized capital stock of the

Bank shall be nine billion pesos, divided into seven hundred
and eighty million common shares with a par value of ten pesos
each, which shall be fully subscribed by the Government, and one
hundred and twenty million preferred shares with a par value of ten
pesos each, which shall be issued in accordance with the provisions of
Sections seventy-seven and eighty-three of this Code. (Emphasis
supplied)
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 supplied)
Other government-owned corporations organized as stock

corporations under their special charters are the Philippine Crop
Insurance Corporation,[42] Philippine International Trading
Corporation, [43]
and the Philippine National Bank [44]
before it was
reorganized as a stock corporation under the Corporation
Code. All these government-owned corporations organized under
special charters as stock corporations are subject to real estate
tax on real properties owned by them. To rule that they are not
government-owned or controlled corporations because they are
not registered with the Securities and Exchange Commission
would remove them from the reach of Section 234 of the Local
Government Code, thus exempting them from real estate tax.
Third, the government-owned or controlled corporations

created through special charters are those that meet the two
conditions prescribed in Section 16, Article XII of the
Constitution. The first condition is that the government-owned or
controlled corporation must be established for the common
good. The second condition is that the government-owned
or controlled corporation must meet the test of economic
viability. Section 16, Article XII of the 1987 Constitution
provides:
SEC. 16. The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may
be created or established by special charters in the interest of
the common good and subject to the test of economic
viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to

create government-owned or controlled corporations through
special charters only if these entities are required to meet the
twin conditions of common good and economic viability. In other
words, Congress has no power to create government-
owned or controlled corporations with special charters
unless they are made to comply with the two conditions of
common good and economic viability. The test of economic
viability applies only to government-owned or controlled
corporations that perform economic or commercial activities and
need to compete in the market place. Being essentially economic
vehicles of the State for the common good meaning for economic
development purposes these government-owned or controlled
corporations with special charters are usually organized as stock
corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with

corporate powers and performing governmental or public
functions need not meet the test of economic viability.These
instrumentalities perform essential public services for the
common good, services that every modern State must provide
its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire
operations. These instrumentalities are not the government-
owned or controlled corporations referred to in Section 16,
Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the
legislature creates government instrumentalities vested with
corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create
government instrumentalities vested with corporate
powers provided these instrumentalities perform essential
government functions or public services. However, when the
legislature creates through special charters corporations that
perform economic or commercial activities, such entities known
as government-owned or controlled corporations must meet the
test of economic viability because they compete in the market
place.
This is the situation of the Land Bank of

the Philippines and the Development Bank of
the Philippines and similar government-owned or controlled
corporations, which derive their income to meet operating
expenses solely from commercial transactions in competition
with the private sector. The intent of the Constitution is to
prevent the creation of government-owned or controlled
corporations that cannot survive on their own in the market
place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of

economic viability, explained to the Constitutional Commission
the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is
really that when the government creates a corporation, there is a
sense in which this corporation becomes exempt from the test of
economic performance. We know what happened in the past. If a
government corporation loses, then it makes its claim upon the
taxpayers money through new equity infusions from the government
and what is always invoked is the common good. That is the reason
why this year, out of a budget of P115 billion for the entire
government, about P28 billion of this will go into equity infusions to
support a few government financial institutions. And this is all
taxpayers money which could have been relocated to agrarian reform,
to social services like health and education, to augment the salaries of
grossly underpaid public employees. And yet this is all going down the
drain.
Therefore, when we insert the phrase ECONOMIC VIABILITY

together with the common good, this becomes a restraint on future
enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable.
And so, Madam President, I reiterate, for the committees 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: ACommentary:
The second sentence was added by the 1986 Constitutional
Commission. The significant addition, however, is the phrase in the
interest of the common good and subject to the test of
economic viability. The addition includes the ideas that they must
show capacity to function efficiently in business and that they
should not go into activities which the private sector can do
better. Moreover, economic viability is more than financial viability
but also includes capability to make profit and generate benefits not
quantifiable in financial terms.[46] (Emphasis supplied)
Clearly, the test of economic viability does not apply to
government entities vested with corporate powers and
performing essential public services. The State is obligated to
render essential public services regardless of the economic
viability of providing such service. The non-economic viability
of rendering such essential public service does not excuse the
State from withholding such essential services from the public.
However, government-owned or controlled corporations
with special charters, organized essentially for economic or
commercial objectives, must meet the test of economic
viability. These are the government-owned or controlled
corporations that are usually organized under their special
charters as stock corporations, like the Land Bank of
the Philippines and the Development Bank of the Philippines.
These are the government-owned or controlled corporations,
along with government-owned or controlled corporations
organized under the Corporation Code, that fall under the
definition of government-owned or controlled corporations in
Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability

because the legislature did not create MIAA to compete in the
market place. MIAA does not compete in the market place
because there is no competing international airport operated
by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of
the Philippines. The operation of an international airport
requires the presence of personnel from the following
government agencies:
1. The Bureau of Immigration and Deportation, to
document the arrival and departure of passengers, screening
out those without visas or travel documents, or those with
hold departure orders;
2. The Bureau of Customs, to collect import duties or

enforce the ban on prohibited importations;
3. The quarantine office of the Department of Health, to

enforce health measures against the spread of infectious
diseases into the country;
4. The Department of Agriculture, to enforce measures

against the spread of plant and animal diseases into the
country;
5. The Aviation Security Command of the Philippine

National Police, to prevent the entry of terrorists and the
escape of criminals, as well as to secure the airport premises
from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation

and Communications, to authorize aircraft to enter or leave
Philippine airspace, as well as to land on, or take off from,
the airport; and
7. The MIAA, to provide the proper premises such as

runway and buildings for the government personnel,
passengers, and airlines, and to manage the airport
operations.
All these agencies of government perform government
functions essential to the operation of an international airport.
MIAA performs an essential public service that every

modern State must provide its citizens. MIAA derives its
revenues principally from the mandatory fees and charges
MIAA imposes on passengers and airlines. The terminal fees
that MIAA charges every passenger are regulatory or
administrative 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:
(10) Instrumentality refers to any agency of the National

Government, not integrated within the department framework, vested
with special functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds,
and enjoying operational autonomy, usually through a charter.
x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does
not make MIAA a government-owned or controlled
corporation. Without a change in its capital structure, MIAA
remains a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code. More
importantly, as long as MIAA renders essential public services, it
need not comply with the test of economic viability. Thus, MIAA is
outside the scope of the phrase government-owned or controlled
corporations under Section 16, Article XII of the 1987
Constitution.
The minority belittles the use in the Local Government Code
of the phrase government-owned or controlled corporation as
merely clarificatory or illustrative. This is fatal. The 1987
Constitution prescribes explicit conditions for the creation of
government-owned or controlled corporations. The Administrative
Code defines what constitutes a government-owned or controlled
corporation. To belittle this phrase as clarificatory or illustrative is
grave error.
To summarize, MIAA is not a government-owned or

controlled corporation under Section 2(13) of the Introductory
Provisions of the Administrative Code because it is not
organized as a stock or non-stock corporation. Neither is MIAA
a government-owned or controlled corporation under Section
16, Article XII of the 1987 Constitution because MIAA is not
required to meet the test of economic viability. MIAA is a
government instrumentality vested with corporate powers and
performing essential public services pursuant to Section 2(10)
of the Introductory Provisions of the Administrative Code. As a
government instrumentality, MIAA is not subject to any kind of
tax by local governments under Section 133(o) of the Local
Government Code. The exception to the exemption in Section
234(a) does not apply to MIAA because MIAA is not a taxable
entity under the Local Government Code. Such exception
applies only if the beneficial use of real property owned by the
Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are
properties devoted to public use and thus are properties of public
dominion. Properties of public dominion are owned by the
State or the Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public

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

State includes airports and seaports. The Airport Lands and
Buildings of MIAA are intended for public use, and at the very
least intended for public service. Whether intended for public use
or public service, the Airport Lands and Buildings are properties
of public dominion. As properties of public dominion,
the Airport Lands and Buildings are owned by the Republic and
thus exempt from real estate tax under Section 234(a) of the
Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of
the Administrative Code, which governs the legal relation and
status of government units, agencies and offices within the entire
government machinery, MIAA is a
government instrumentality and not a government-owned or
controlled corporation. Under Section 133(o) of the Local
Government Code, MIAA as a government instrumentality is
not a taxable person because it is not subject to [t]axes, fees or
charges of any kind by local governments. The only exception is
when MIAA leases its real property to a taxable person as
provided in Section 234(a) of the Local Government Code, in
which case the specific real property leased becomes subject to
real estate tax. Thus, only portions of the Airport Lands and
Buildings leased to taxable persons like private parties are
subject to real estate tax by the City of 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 Authority has leased to private parties. We also
declare VOID the assailed auction sale, and all its effects, of
the Airport Lands and Buildings of the Manila International Airport
Authority.
No costs.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
REYNATO S. PUNO LEONARDO A.
Associate Justice QUISUMBING
Associate Justice
CONSUELO YNARES- ANGELINA SANDOVAL-

SANTIAGO GUTIERREZ
Associate Justice Associate Justice
MA. ALICIA AUSTRIA- RENATO C. CORONA

MARTINEZ Associate Justice
Associate Justice
CONCHITA CARPIO ROMEO J. CALLEJO, SR.

MORALES Associate Justice
Associate Justice
ADOLFO S. AZCUNA DANTE O. TINGA
MINITA V. CHICO- CANCIO C. GARCIA

NAZARIO Associate Justice
Associate Justice
PRESBITERO J. VELASCO, JR.

Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify

that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the
opinion of the Court.
ARTEMIO V. PANGANIBAN
Chief Justice
[1]
Dated 16 September 1983.
[2]
Dated 26 July 1987.
[3]
Section 3, MIAA Charter.
[4]
[5]
[6]
Rollo, pp. 22-23.
[7]
Under Rule 45 of the 1997 Rules of Civil Procedure.
[8]
330 Phil. 392 (1996).
[9]
MIAA Charter as amended by Executive Order No. 298. See note 2.
[10]
Batas Pambansa Blg. 68.
[11]
Section 11 of the MIAA Charter provides:
Contribution to the General Fund for the Maintenance and Operation of

other Airports. Within thirty (30) days after the close of each quarter,
twenty percentum (20%) of the gross operating income, excluding payments
for utilities of tenants and concessionaires and terminal fee collections, shall
be remitted to the General Fund in the National Treasury to be used for the
maintenance and operation of other international and domestic airports in the
country. Adjustments in the amount paid by the Authority to the National
Treasury under this Section shall be made at the end of each year based on
the audited financial statements of the Authority.
[12]
Section 5(j), MIAA Charter.
[13]
[14]
Section 5(k), MIAA Charter.
[15]
Section 5(o), MIAA Charter.
[16]
Third Whereas Clause, MIAA Charter.
[17]
Id.
[18]
CONSTITUTION, Art. X, Sec. 5.
[19]
274 Phil. 1060, 1100 (1991) quoting C. Dallas Sands, 3 STATUTES and
STATUTORY CONSTRUCTION 207.
[20]
274 Phil. 323, 339-340 (1991).
[21]
CONSTITUTION, Art. VI, Sec. 28(1).
[22]
First Whereas Clause, MIAA Charter.
[23]
30 Phil. 602, 606-607 (1915).
[24]
102 Phil. 866, 869-870 (1958).
[25]
PNB v. Puruganan, 130 Phil. 498 (1968). See also Martinez v. CA, 155 Phil. 591 (1974).
[26]
MIAA Charter, Sec.16.
[27]
Chavez v. Public Estates Authority, 433 Phil. 506 (2002).
[28]
[29]
G.R. No. 144104, 29 June 2004, 433 SCRA 119, 138.
[30]
Republic Act No. 7653, 14 June 1993, Sec. 5.
[31]
Executive Order No. 1061, 5 November 1985, Sec. 3(p).
[32]
Republic Act No. 4850, 18 July 1966, Sec. 5.
[33]
Presidential Decree No. 977, 11 August 1976, Section 4(j).
[34]
Republic Act No. 7227, 13 March 1992, Sec. 3.
[35]
Presidential Decree No. 857, 23 December 1975, Sec. 6(b)(xvi).
[36]
Republic Act No. 4663, 18 June 1966, Sec. 7(m).
[37]
[38]
[39]
Republic Act No. 4156, 20 June 1964. Section 4(b).
[40]
Republic Act No. 3844, 8 August 1963, as amended by Republic Act No. 7907, 23
February 1995.
[41]
Executive Order No. 81, 3 December 1986.
[42]
Republic Act No. 8175, 29 December 1995.
[43]
Presidential Decree No. 252, 21 July 1973, as amended by Presidential Decree No.
1071, 25 January 1977 and Executive Order No. 1067, 25 November 1985.
[44]
Executive Order No. 80, 3 December 1986.
[45]
III RECORDS, CONSTITUTIONAL COMMISSION 63 (22 August 1986).
[46]
2003 ed., 1181.
[47]
Manila International Airport Authority v. Airspan Corporation, G.R. No. 157581, 1
December 2004, 445 SCRA 471.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58797 January 3l,1989
ANTONIO QUIRINO, as Special Administrator, Testate Estate of Natividad C.

Raquiza, and Intestate Estate of Carmen M. Castellvi, petitioner,
vs.
HON. NATHANAEL M. GROSPE, in his capacity as Presiding Judge, Branch VI,
Court of First Instance of Pampanga, Fifth Judicial District, and WILFREDO M.
GOINGCO, Administrator, Testate Estate of Don Alfonso
Juan F. Gomez for and in his own behalf.
Antonio, Quirino and Ernesto P. Pangalangan for petitioner.
Valentino LL. Quevedo for Raquiza children.
Engelberto A. Farol for Jasmin Raquiza.
RESOLUTION
PADILLA, J.:
For resolution are the separate motions for reconsideration of the decision of this Court,
dated 25 April 1988, filed by Juan F. Gomez, Jesus T. David, Raquiza children and their
father Antonio V. Raquiza (as alleged heirs of Natividad Castellvi), and petitioner
Antonio Quirino; motion for intervention of Carmen Castellvi et al. (as alleged heirs of
Don Juan Castellvi); the motion for clarificatory order of Juan F. Gomez; and omnibus
motion for early resolution and immediate release of funds, filed by the Raquiza
children. The Court Will resolve the motions separately.
1. Motion for Reconsideration of Juan F. Gomez.
Movant's claims are for attorney's fees equivalent to 12% of one-third

(1/3) of the estate of Don Alfonso Castellvi and P30,000.00 representing
transportation and representation expenses, for services admittedly
rendered to the heirs of Don Juan Castellvi. These claims may not be
properly charged against the estate of Don Alfonso Castellvi.
As held in Gabin v. Malleja (84 Phil. 794), the term "claims" required to be
presented against a decedent's estate is generally construed to mean
debts or demands of a pecuniary nature which could have been enforced
against the deceased in his lifetime or liability contracted by the deceased
before his death. It is important to note that movants claims for
attorney's fees and transportation as wen as representation expenses are
for services rendered to the alleged substituted heirs of Don Juan Castellvi
and such services did not inure to the benefit of Don Alfonso Castellvi or
his estate. The court charged with the settlement of the estate of Don
Alfonso Castellvi is bound to protect the estate from any disbursements
based on claims not chargeable to the estate.
We find no merit in movants contention that he was deprived of due

process, on the ground that he was not impleaded as party respondent in,
and required to answer the petition for certiorari, subject of this Court's
decision dated 25 April 1988. Prior to the promulgation of said decision,
movant had already filed a motion for intervention, 1 and the allegations
set forth therein were duly considered and studied by the Court.
Furthermore, even if Gomez was not impleaded as party respondent in
said petition for certiorari, his act of filing the said motion for intervention
as well as his present motion for reconsideration, indubitably gave him an
adequate opportunity to present his side of the controversy, and therefore
cured any defect of alleged lack of due process.
Petitioner's failure to file a motion for reconsideration of the questioned

orders of the court a quo is not fatal. Although as a general
rule, certiorari will not lie unless the lower court has, through a motion for
reconsideration, been given a chance to correct the errors imputed to it,
this rule, however, admits of exceptions, like: (1) when the issue raised is
one purely of law; (2) where public interest is involved; and (3) in case of
urgency. 2 In the case at bar, the questioned orders of the trial court were
already being executed, hence, there was an urgency which caused the
case to fall under one of the exceptions, thereby allowing petitioner to file
a petition for certiorari without need of first filing a motion for
reconsideration.
2. Motion for Reconsideration of Jesus T. David.

The claim for attorney's fees of intervenor Jesus T. David is for services
rendered for the benefit of Doña Carmen Castellvi, and not for the benefit
of Don Alfonso Castellvi or his estate. As discussed earlier, only claims
which could have been enforced against the deceased in his lifetime are
allowed to be presented against his estate, with the exception of funeral
expenses, expenses for the last sickness 3 and administration expenses in
the ordinary course thereof. 4
As to the alleged attachment and levy of Doña Carmen's alleged

administratrix' fees and share in the estate of Don Alfonso Castellvi, the
same cannot be given force and effect in the special proceedings for the
settlement of Don Alfonso's estate. It must be stressed that the subject of
settlement in this case is not the estate of Doña Carmen Castellvi. For
intervenor to insist on enforcing in this proceeding his claim against Doña
Carmen's alleged fees as administratrix and share in the estate of Don
Alfonso Castellvi, would be irregular and untenable. It should be borne in
mind that the respondent court is one of limited jurisdiction, and it has no
authority to determine as to who are the heirs of Don Juan Castellvi
and/or decide the claims or demands which may be properly paid out of
the funds of the estate of Doña Carmen Castellvi. Such issues have to be
determined in separate proceedings.
For this Court to allow in this proceeding which is for the settlement of the
estate of Don Alfonso Castellvi the enforcement of the claim of David
against Doña Carmen's alleged share in the estate of Don Alfonso
Castellvi, would amount to summarily declaring Doña Carmen an heir of
Don Alfonso, without giving the other heirs or claimants to the latter's
estate an opportunity to oppose the same. Moreover, whatever fees Doña
Carmen might have earned during her lifetime as administratrix of the
estate of Don Alfonso Castellvi should go to her estate. Hence, whatever
claim herein intervenor has against the deceased Doña Carmen Castellvi,
should be presented before the court with jurisdiction in settling her
estate. Intervenor cannot resort to a short cut and present his claim
directly to this Court to suit his own end and convenience thereby
brushing aside the settled rules of applicable procedure.
3. Motion for Reconsideration of the Raquiza children
Movants would like to impress upon this Court that the award of
attorney's fees to Atty. Mendoza equivalent to 12% of the gross value of
the estate of Don Alfonso Castellvi is not valid on the ground that they
never gave their consent thereto, nor did Doña Carmen Castellvi, then
administratix of the estate of Don Alfonso Castellvi. However, the record
of this case shows that Natividad Castellvi-Raquiza, the instituted heir to
two- third (2/3) of the estate of Don Alfonso Castellvi, gave her
conformity to such award of attorney's fees in favor of Atty.
Mendoza. 5 Moreover, movants, through their father and general guardian
Atty. Antonio V. Raquiza, had agreed to grant said attorney's fees. In fact,
separate manifestations 6 were filed by Atty. Raquiza and Carmen Castellvi
with the court a quo stating that they were withdrawing their oppositions
to said claim.
With regard to Floro's claim for payment for services rendered to the
estate of Don Alfonso Castellvi, the rule is that where the monetary claim
against the administrator has a relation to his acts of administration in the
ordinary course thereof, such claims can be presented for payment with
the court where a special proceeding for the settlement of the estate is
pending, although said claims were not incurred by the deceased during
his lifetime and collectible after his death. This is so, because the
administration is under the direct supervision of the court and the
administrator is subject to its authority. 7
As to the question of whether or not the movants are the heirs of

Natividad Castellvi-Raquiza, thus, entitled to her share in the estate of
Don Alfonso, determination of said issue is again not within the
jurisdiction of the court a quo charged only with the settlement of the
estate of Don Alfonso.
4. Motion for Reconsideration of Antonio Quirino
As discussed earlier, Natividad Castellvi-Raquiza and Doña Carmen

Castellvi (as administratrix of the estate of Don Alfonso Castellvi) had
given their conformity to the award of attorney's fees to Atty. Mendoza.
Petitioner who now is acting as special administrator of the estates of
Natividad Castellvi-Raquiza and Carmen Castellvi is estopped from
questioning said award.
Insofar as payment of service fees to Exequiel Floro, the same was

allowed for services rendered by claimant for the benefit of the estate of
Don Alfonso Castellvi and the same falls under the category of
"administration expense" which may be paid out of the finds of the estate.
Moreover, the heirs of Don Alfonso Castellvi had dropped their opposition
to said claim, thus, they are barred from questioning the same at this
stage.
5. Motion for Intervention of Carmen Castellvi, et al.
Intervenors (as alleged substituted heirs of Don Juan Castellvi) seek

clarification of the term "instituted heirs' and a modification of the
decision dated 25 April 1988, so that the term "instituted heirs' would
include the substituted heirs of Don Juan Castellvi. They likewise move for
the setting aside of the portion of the decision which provides for the final
settlement and distribution of the estate of Don Alfonso to the instituted
heirs or their respective estates, if it would mean that delivery of the one
third (1/3) share of the estate of Don Alfonso is to be made only to Don
Juan Castellvi or his estate.
They further claim that for this Court to order the delivery of the residue
of the estate of Don Alfonso to the 'estate of Don Juan Castellvi (to the
extent of (1/3 as decreed in Don Alfonso's last will) instead of his
substituted heirs, will result in the latter re-litigating among themselves
and/or with other parties for their respective shares over the estate of
Don Juan Castellvi, when they had already ventilated the issue of heirship
over the same before the court a quo, and they were declared heirs of
Don Juan Castellvi and substituted heirs to his one-third (1/3) share in the
estate of Don Alfonso Castellvi. 8
We find intervenors contention to be without merit. To allow intervenors

instead of the estate of the instituted heir, Don Juan Castellvi to receive
the residue of the estate of Don Alfonso would be not only prejudicial to
the creditors of Don Juan but also to the government in the form of non-
payment of taxes required by law. The transfer of the estate of Don
Alfonso Castellvi to his instituted heirs (Natividad Castellvi-Raquiza and
Don Juan Castellvi) is subject to payment of estate taxes. Before the
estates of Don Juan Castellvi (and Natividad Castellvi-Raquiza) can be
transferred to their heirs, again, estate taxes must first be paid to the
government. To allow intervenors, as substituted heirs of Don Juan
Castellvi, to receive directly from the estate of Don Alfonso, the share
pertaining to Don Juan, could result in a single transfer of property and a
single payment of estate taxes, in fraud of the government.
Moreover, the court a quo has no jurisdiction to determine who are the
heirs of Don Juan Castellvi; said issue has to be ventilated in a separate
proceeding.
6. Motion for Clarificatory Order of Juan F. Gomez
Movant seeks clarification of the decision of this Court, dated 25 April

1988, denying his claim for attorney's fees, as to whether or not it is
meant to annul not only the order fixing his fees but also the contract for
services approved in the order issued by the court a quo, dated 5 October
1981.
Movant's claim is chargeable to the heirs of Don Juan Castellvi, his clients,
and the court a quo has no jurisdiction to fix such fees for services
rendered not to the estate of Don Alfonso, but to the heirs of Don Juan. It
follows that the court a quo has no jurisdiction to approve a contract of
legal services between claimant and the heirs of Don Juan. The court a
quo is of limited jurisdiction, empowered to settle only the estate of Don
Alfonso Castellvi: any act done in excess of such limits may not be given
force and effect.
7. Omnibus Motion for Early Resolution and Immediate Release for Funds
by the Raquiza Children
In the motion at bar, movants seek approval for the release of the
amount of P300,000.00 to allegedly take care of the burial expenses
incurred upon the death of Natividad Castellvi-Raquiza. Said motion for
release of funds was previously presented before the court a quo and
subsequently denied.
What movants are actually praying of this Court is to reverse the order of denial of their
motion for release of funds. Before a review can be made of said order of denial,
movants should have filed a proper petition before this Court and not a mere motion.
This incident is not covered by the petition for certiorari resolved in the decision of 25
April 1988.
ACCORDINGLY, the motions for reconsideration filed by Juan F. Gomez, Jesus T. David,
Raquiza children, and Antonio Quirino are hereby DENIED. This denial is FINAL. The
motion for intervention of Carmen Castellvi, et al., the motion for clarificatory order of
Juan F. Gomez, and the omnibus motion for early resolution and release of funds by the
Raquiza children, are also DENIED.
SO ORDERED,
Melencio-Herrera, (Chairperson), Paras, Sarmiento and Regalado, JJ., concur.
Footnotes
1 Filed 11 December 1987, Rollo pp. 516-525.
2 Gonzales, Jr. IAC, 131 SCRA 468, 28 August 1984.
3 Sec. 5., Rule 86 of the Rules of Court.
4 Paula v. Escay, 97 Phil. 617.
5 Rollo, p. 619.
6 Rollo, pp. 85-87.
7 Paula v. Escay, Supra.
8 Rollo, p. 648.
SUPREME COURT
Manila
EN BANC
G.R. No. 46242 October 20, 1939
In re estate of the deceased DIEGO DE LA VIÑA.

JOSE MA. DE LA VIÑA Y DE LA ROSA, ex-administrator-appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, creditor-appellee.
Enrique Medina for appellant.

Raymundo Villanueva for the administrator of the estate of De la Viña.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for
appellee.
VILLA-REAL, J.:
This is an appeal taken by the ex-administrator, Dr. Jose MA. de la Viña y de la Rosa,
from the order of the Court of First Instance of Negros Oriental, the dispositive part of
which reads:
Wherefore the Court reiterates the order of March 7, 1933, only in so far as the
claim of the Insular Government is concerned, and orders the Administrator
herein to pay from whatever available fund of the estate of the deceased Diego
de la Viña the sum of P18,420.93 with the corresponding legal interests from
August 20, 1929 plus costs, to the Commonwealth of the Philippines.
It is also ordered that after the said claim shall have been fully paid, the
administrator herein shall pay to Dr. Jose de la Viña y De la Rosa the sum of
P19,342.93 and to other claimants their respective claims in the order
established by law out of the residue.
In support of his appeal the appellant assigns three alleged errors committed by the
trial court in its order, to wit:
1. The trial court erred in holding that the income tax claimed by the Collector of
Internal Revenue, should be paid before the administration expenses claimed by
the appellant executor Dr. Jose Ma. de la Viña y de la Rosa.
2. The trial court erred in applying article 1923 of the Civil Code and in not
holding that the said article has been repealed by section 735 of the Code of Civil
Procedure (Act 190).
3. Granting for the sake of argument that the payment of income tax has
preference over the payment of administration expenses, the trial court erred in
holding that said preference has been abandoned and lost due to the time that
has elapsed from 1925 to 1938.
The following are undisputed facts:
On April 8, 1920, after the death of Diego de la Viña, his brother, the herein appellant
Dr. Jose Ma. de la Viña, was appointed by the Court of First Instance of Negros Oriental
as special administrator of the estate of the deceased; and on the 20th of the same
month and year he was appointed executor.
On January 23, 1926, this Court issued in civil case G.R. No. 23747, entitled "In re
estate of Diego de la Viña, deceased, Jose de la Viña v. Narcisa Geopano et al.," an
order approving the accounts of the said Dr. Jose de la Viña, as outgoing administrator
of the estate of Diego de la Viña. It appears from the decision of this Court rendered in
said Civil Case G.R. No. 23747 that the following items were approved:
Special per diems of Jose de la Viña as

former adminstrator .............................. P12,552.00
Legal Commission ............................... 4,141.33
Total
............................................................ 16,693.33
In the bill of exceptions in said case it also appears that the following expenses of Jose
de la Viña were approved:
Balance in his favor as executor .................... P1,165.86

Balance on his aparceria ................................ 7,528.64
Total
...................................................................... 8,694.50
On July 16, 1927, the said Court of First Instance of Negros Oriental ordered in the
present case the payment to Dr. Jose de la Viña of the amount of 146.025 piculs of
sugar belonging to him, which product was applied to the payment of the
administration expenses of the estate of Diego de la Viña. The price of said sugar was
fixed at P20 per picul by a subsequent order. Adding the sum of P2,925, the value of
said 146.025 piculs of sugar, to the sum of P25,387.83, the result is a total of
P28,312.83. As the amount of P9,228.65 has been paid on account, there remains a
balance of P19,048.18 in favor of the appellant.
It also appears that on February 23, 1932, this Court rendered judgment in G.R. No.
33870, entitled "The Collector of Internal Revenue vs. Espiridion Villegas, as
administrator of the estate of Diego de la Viña", ordering the said administrator to pay
the Insular Government, by way of income tax for the year 1925, the sum of
P18,420.93, with interest from August 20, 1939 until fully paid, and the costs.
The estate of Diego de la Viña does not have sufficient funds or property to pay fully
both judgments. When the Insular Government attempted to collect the amount of the
said judgment in its favor, Dr. Jose de la Viña objected on the ground that the
judgments obtained by him are preferred under section 735 of Act No. 190, and should
first be paid. After the corresponding trial, the trial court overruled the opposition and
entered the above-quoted order.
The first question to be decided in this appeal, which is raised by the first assignments
of error, is whether or not the trial court erred in holding that the income tax claimed
by the Collector of Internal Revenue, should be paid before the administration expenses
claimed by the ex-executor, Dr. Jose Ma. de la Viña y de la Rosa.
Section 735 of the Code of Civil Procedure, as amended by Act No. 3960, provides as
follows:
SEC. 735. Order of payment if estate insolvent. — If the assets which can be
appropriated for the payment of debts are not sufficient for that purpose, the
executor or administrator shall, after pay the debts against the estate in the
following order:
1. The necessary funeral expenses;
2. The expenses of the last sickness;
3. What is owing to the laborer for salaries and wages earned and for
indemnities due to him, for the last year;
4. Debts due to the United States;
5. Taxes and assessments due to the Government, or any branch or subdivision

thereof;
6. Debts due to the province;
7. Debts due to other creditors.
In view of the legal provision just quoted, the question is whether the income tax which
an estate owes the Insular Government partakes of the nature of administration
expenses for purposes of the order of payment established by section 735 of Act No.
190 above quoted. Section 680 of the same code of Civil Procedure provides as follows:
SEC. 680. — How allowed for services. — The executor or administrator shall be
allowed necessary expenses in the care, management, and settlement of the
estate, and for his services, two dollars per day for the time actually and
necessarily employed, and a commission of three per cent upon all sums
disbursed in the payment of debts, expenses, and distributive shares, if the
amount of such disbursements does not exceed one thousand dollars. If the
amount exceeds one thousand dollars and does not exceed five thousand dollars
and one-half per cent upon the excess, if the whole amount does not exceed five
thousand dollars, then the percentage as above provided, and one per cent on
the excess above five thousand dollars. But in any special case, where the estate
is large, and the settlement has been attended with great difficulty, and has
required a high degree of capacity on the part of the executor or administrator, a
greater sum may be allowed. But if objection to the fees allowed be taken, the
allowance may be re-examined by the Supreme Court on appeal.
When the administrator or executor is a lawyer, he shall not be allowed to

charge against the estate any professional fees, as such, for services rendered
by himself. When the deceased by will makes some other provision for
compensation to his executor, the provision shall be full satisfaction for his
services, unless by a written instrument filed in the court he renounces all claim
to the compensation provided by the will.
The legal provision just quoted enumerates the services for which the administrator
should be paid and the commission to which he is entitled for collections and
disbursement made by him. Among these payments, which constitutes the expenses of
administration, are not included pending debts of the estate, whatever may be their
nature. According to the said legal provision, only payments which the executor or
administration may have made in the discharge of his office and the commissions to
which he may be entitled, partakes of the nature of administration expenses. the
expenses of administration are due only to the executor or administrator, and he alone,
and no other, may collect them.
The Collector of internal Revenue contends that the tax of P18,420.93 which he seeks
to collect, having been laid on the profits realized in the sale of the properties of the
deceased Diego de la Viña, effected on September 29, 1925 by the judicial
administrator of the estate, the said tax partake of the nature of administration
expenses. As we have said, the necessary expenses of administration whose payment is
given preference in the said section 735 of the Code of Civil Procedure are those which
the administrator may have incurred in the care, administration and liquidation of the
properties of the estate and the commissions due to him for collections and
disbursements which he may have made, and not those which he cold or might have
wished to make out of his own pocket or but of the funds of the estate. "Administration
expenses," says Corpus Juris, volume 24, page 424, "include expenditures in
discovering and preserving assets, attorneys fees incurred in connection with the
administration of the estate, incurred in connection with the administration of the
estate, cost recovered against the representative in an action to recover assets, to
established a claim against the estate, to try title to land, and insurance premiums
expended for the protection of the property and it has even been considered that
expenditures in carrying on decedent's business may be regarded as expenses of
administration." And Woerner, volume 2, page 1197, paragraph 362, third edition, of
his work entitled "The American Law of Administration of the Estate," says the
following:
It has already been stated, that for the expenses attending the accomplishment
of the purpose of administration growing out of the contract or obligation entered
into by the personal representative he is to be reimbursed out of the estate, and
that his claim to reimbursed must be superior to the rights of the beneficiaries.
They are subject only to the lien of a mortgage executed on specific property by
the deceased in his lifetime. The expenses under this category include those paid
for probate of the will, as well in the Probate court as on appeal, or other
proceeding in a contest, if carried on in good faith; and the executor nominated
in such will is entitled to a settlement of his account, and reimbursement for his
expenses in preserving the estate and for the funeral, although the will be finally
pronounced invalid; and, generally, all expenses necessary in the protection and
preservation of the estate, which have been held to include the costs of
establishing a claim against the estate. But the general rule seems rather to be
that costs incurred by the administrator in defense of claims against the estate,
or in prosecuting claims in favor of it, pertain to the administration, and are to
be allowed in full; but costs incurred by claimants in establishing their claims
stand on the same footing with the claims themselves. The allowance of counsel
fees and costs is discussed in connection with the subject of accounting. Repairs
necessary upon real estate of which the executor or administrator has lawful
possession also constitute expenses of administration; if the expenses incurred is
general, affecting all the property of the estate, it should be charged generally,
but if attaching to a specific portion or piece of property, it should be charged
against such portion or piece.
The liability of the administrator as such cannot be treated as a continuation of a

running account with the deceased in his lifetime; nor can the defendant in an
action by an administrator upon a contract made by him as such, or to recover
assets of the estate, set off or counterclaim a debt due him from the deceased.
And it is held that one who renders services for a trust has no recourse against
the trust, except to subject an equitable demand of the trustee to the payment
of the debt.
The mere fact, therefore, that the income tax claimed by the Collector of Internal
Revenue had been imposed upon the profits obtained by the administrator of the estate
in the sale of certain properties of the deceased Diego de la Viña, after the latter's
death, does not make the said tax a necessary expense of administration, unless the
administrator had paid it either from his own pocket or out of the funds of the estate: in
the first case the tax paid is converted into an expense of administration which the
administrator may fully recover, plus his commission; in the second case, he may only
collect his commission, which partakes of the nature of an expense of administration.
In the decision promulgated on May 18, 1938, in the Estate of the deceased Claude E.
Hoygood, The Collector of Internal Revenue, claimant and appellee, vs. Annie Laurie
Haygood, administratix and appellant, G.R. No. 44038, this Court said:
In accordance with section 9, paragraph (a) of Act No. 2833, the assessment
made by the Collector of Internal Revenue within three years after the discovery
of an erroneous declaration shall be paid by the maker of the return immediately
upon being notified of the assessment. The procedure prescribed by law is,
therefore summary, and collection must be made from the person liable is
already dead, collection must necessarily be made from the estate of the
deceased, either in a state or intestate proceedings instituted before a
competent court, by motion together with the sworn statement of the taxes due
filed with said court, so that it may require the administrator to pay the claim if
the latter has funds available therefor, that is, following the order of preference
provided in section 735 of the Code of Civil Procedure in case the said estate
should insolvent. If the testate or intestate is solvent, the court may order the
payment of the claim without necessity of its being substantiated by evidence
since the sworn statement constitutes prima facie evidence of the existence of
the unpaid taxes, and the administrator is under obligation to pay such claim,
under protest if he is not agreeable, without prejudice to his right later to
recover the taxes so paid, in the manner provided by law (Act No. 2711, sec.
1579, as amended by Act No. 3685).
The Collector of Internal Revenue also contends that the income tax in question, being
a lien created by the law superior to any other existing upon the property on which it is
imposed, under the provisions of section 1588 of the Revised Administrative Code, as
amended, enjoys preference over the necessary expenses of administration.
The lien created by the said section 1588 of the Revised Administrative Code, having
reference to all internal revenue taxes, including the income tax here in question, is
general in character, and the order of its payment as a lien is applicable to all
properties subject to the payment of internal revenue tax; whereas the order of
payment established by section 735 of the Code of Civil Procedure, as amended by Act
No. 3960, is special in character and is only applicable to properties of deceased
persons; consequently, in accordance with the cardinal rule of statutory construction,
the latter provision of law should prevail over the former. In section last mentioned, the
taxes due to government of any branch or subdivision thereof occupy the fifth place in
the order of payment; wherefore, the indebtedness of the estate of Diego de la Viña for
income tax not being a necessary expense of administration, and the claim of the ex-
administrator Dr. Jose Ma. de la Viña y de la Rosa being such necessary expense of
administration, the latter has preference over the former.
The appellee denies that the first claim for P12,552 for special per diems partakes of
the nature of necessary expenses of administration, for lack of allegation or proof to
that effect. Section 680 of the Code of Civil Procedure already cited provides that "but
in any special case, where the estate is large, and the settlement has been attended
with great difficulty, and has required a high decree of capacity on the part of the
executor or administrator, a greater sum may be allowed." There is no doubt that the
estate of Diego de la Viña is large. The determination of whether the administration and
liquidation thereof have been attended with great difficulty and have required a high
degree of capacity on the part of the executor or administrator, rests in the sound
discretion of the Court which took cognizance of the said estate. It not appearing that
the lower court committed an abuse of discretion in granting a greater remuneration to
the appellant, we do not feel warranted in interfering with the exercise of said
discretion.
In view of the foregoing consideration, we are of the opinion and so hold: (1) that the
income tax which an estate owes to the insular government for profits obtained in the
sale of properties belonging to it, after the death of the testator, does not partake of
the nature of necessary expenses of administration; (2) that the lien created by section
1588 of the Revised Administrative Code for internal revenue tax on properties subject
to it, being general in character, yields to the preference established by section 735 of
the Code of Civil Procedure, as amended by Act No. 3960, in favor of the necessary
expenses of administration of the estate of a deceased person; and, (3) that the claim
of an administrator for the necessary expenses of administration enjoys preference over
the claim for payment of income tax.
Wherefore, the remedy prayed for is granted, the appealed decision is reversed, and it
is held that the claim of the appellant, Dr. Jose Ma. de la Viña y de la Rosa, as ex-
administrator of the estate of the deceased Diego de la Viña has preference over that of
the Collector of Internal Revenue for income tax, without special pronouncement as to
costs. So ordered.
Diaz, Concepcion and Moran, JJ., concur.
Separate Opinions
IMPERIAL, J., dissenting:
This appeal has to do with the order of the Court of First Instance of Negros Oriental of
October 6, 1937, rendered in Special Proceedings No. 7, entitled, Testate of the
deceased Diego de la Viña, which directed the judicial administrator to pay
preferentially out of any funds of the estate the sum of P18,420.93, with legal interest
thereon from August 20, 1929, plus the costs, which the Collector of Internal Revenue
claimed as income tax which the estate should pay on the profit which it obtained in the
sale of certain property of the deceased; and after paying said amount, to pay also the
credits of Dr. Jose Ma. de la Viña y de la Rosa Amounting to P19,342.93.
On April 8, 1920, the appellant Dr. Jose Ma. de la Viña was appointed special
administrator of the estate of his deceased brother Diego de la Viña, Special
Proceedings No. 7 of the Court of First Instance of Negros Oriental, and on the 20th of
the same month he discharged the office of executor. In the decision rendered on
January 23, 1926, in G.R. No. 23747 this Court held that Dr. Jose Ma. de la Viña was
entitled to collect from the estate the following amounts:
Balance due in his favor as executor ........ P1,165.86

Balance on his aparceria 7,528.64
...........................
Special per diem compensation .............. 12,552.00
Legal commission
...................................... 4,141.33
Total
............................................................. 25,387.83
On July 16, 1927 the Court ordered in the same proceeding that Dr. de la Viña be paid
the amount of 146.025 piculs of sugar belonging to him, which amount, in money, he
paid by way of expenses of administration of the estate. The price of the sugar was
fixed at P20 per picul, the value thereof amounting to P2,925. Adding this amount to
the credit approved in the decision rendered by this Court, the result is a total of
P28,312.83. As Dr. de la Viña had been paid on amount of his credit the sum of
P9,228.65, a balance of P19,084.18 remained in his favor. On the other hand, on
February 23, 1932 this court rendered judgment in G.R. No. 33870, entitled
the Collector on Internal Revenue vs. Espiridion Villegas, as administrator to pay the
Insular government, by way of income tax for the year 1925, the sum of P18,420.93,
with legal interest from August 20, 1929 until fully paid, and the costs.
The government asked for immediate payment of its credit and as the estate did not
have sufficient funds to meet all the credits admitted and allowed, DR. de la Viña filed
an opposition on the allegation that his credit is preferred to that of the Government
because it represents expenses of administration. In the appealed order the Court held
that the claim of the Government is preferred and should be paid before that of Dr. de
la Viña. This appellant maintains in his brief that the Court erred: in holding that the tax
sought to be revered by the government has preference of his claim and that it should
be paid before the expenses of administration of the estate, such as his credit; in
improperly applying article 1923 of the Civil Code, instead of section 735 of the Code of
Civil Procedure; and not holding that the preference of the credit of the Government
has been abandoned and lost because of the time that has elapsed from 1925 to 1938,
supposing that the said credit is really preferred.
To my mind the priority of the two credits is really depends upon the nature or concept
which each has before the law. The appellant contends that his claim, for expenses of
administration of the estate allowed and approved by the trial court and by this Court,
is preferred and would first be paid. The Government, in turn, argues that its credit,
which consists in the tax due upon the profits which the estate obtained in the sale of
one of its properties in 1925, is preferred not only because it has to do with a tax which
constitutes a lien, but also because it partakes of the nature of administration
expenses. As will be seen, independently of the lien, relied upon by the Government,
the first question to be decided is whether both credits should be considered as
expenses of administration under the law.
It is admitted that the appellant's claim partakes of the nature of administration

expenses, hence, it remains to find out whether the credit of the Government is of the
same nature. Section 735 of the Code of Civil Procedure, as amended by Act No. 3960,
reads:
SEC. 735. Order of payment if estate insolvent. — If the assets which can be
appropriated for the payment of debts are not sufficient for that purpose, the
executor or administrator shall, after paying the necessary expenses of
administration, pay the debts against the estate in the following order:
1. The necessary funeral expenses;
2. The expenses of the last sickness;
3. What is owing to the laborer for salaries and wages earned and for the
indemnities due to him, for the last year;lâwphi1.nêt
4. Debts due to the United States;
5. Taxes and assessments due to the Government, or any branch or subdivision

thereof;
6. Debts due to the province;
7. Debts due to other creditors.
Under this section, if the properties of a deceased person are insufficient to pay all his
obligation, there shall be paid, in the first place, all the expenses of administration and
thereafter his admitted indebtedness in the order therein mentioned. The said section,
or any other section of the Code of Civil Procedure, does not define what is meant by
expenses of administration; but in Lizarraga Hernamos vs. Abada (40 Phil., 124), it was
said that by expense of administration should be understood the reasonable and
necessary expense of caring for the property and managing it till the debts are paid, as
provided by law, and of dividing it, if necessary, so as to partition and deliver it to the
heirs. In this jurisdiction it has been invariably decided that the claims of the
Government for income tax need not be filed with the Committee on claims and should
be paid directly by the executor or administrator out of the funds of the estate of the
deceased (Pineda vs. Court of First Instance of Tayabas, 52 Phil., 803; Government of
the Philippine Islands, 60 Phil., 461). And these claims need not be filed with the
committee appointed by the Court because they partake of the mature of
administration expenses. If they were ordinary credits against the estate of a deceased
person, or debts of the latter, there is no doubt that they should be filed with and
approved by the committee on claims. In the first of the cited cases it was held that
income taxes due from a deceased person, assessed during his lifetime or after his
death, are claims which not be submitted to the committee and that they are proper
and necessary expenses of administration of the estate of the deceased. In said case it
was said.
To reply to these contentions in turn, we observe that, while there are few courts
that have expressed themselves to the effect that a claim for taxes due to the
Government should be presented like other claims to the committee appointed
for the purpose of passing upon claims, the clear weight of judicial authority is to
the effect that claims for taxes and assessments, whether assessed before or
after the death of the decedent, are not required to be presented to the
committee. (24 C.J., 325; People v. Olivera, 43 Cal., 492; Hancock v.
Whittemore, 50 Cal., 522; Findley v. Taylor, 97 Iowa, 420; Bogue v. Laughlin,
149 Wis., 271; 40 L.R. A. [N.S.], 927; Ann. Cas. 1913 C., p. 1367.)
In the case before us the tax now claimed by the Government was not due until
it was assessed; and this assessment was not made until after the individual
against whom the tax was assessed had died. The claim therefore arose during
the course administration. The law imposes on the administrator of a deceased
person the duty to pay taxes assessed against the property of the deceased; and
as well known, in case of insolvency, such taxes constitute a preferential claim in
the distribution of assets over ordinary debts, under section 735 of the Code of
Civil procedure. In the case before us it is not suggested that the estate is
insolvent, and there is therefore no danger of imperiling the payment of funeral
expenses or expenses of last sickness by ordering the immediate payment of
these taxes.
In the United States the same doctrine governs and incomes taxes have always been
considered as expenses of administration and not as debts of a deceased person which
should be presented, for their approval, to the committee on claims. Thus in People v.
Olivera (43 Cal., 492, 494), the Supreme Court of California said:
Whatever may be the rule when taxes are assessed during the lifetime of the
decedent—and we are not called upon to express any opinion in reference to it—
it is clear that taxes assessed against the property of an estate, pending
administration, and while it is in the possession and under the management and
control of an administrator, are not "claims" against the estate which must be
presented, supported by an affidavit, and allowed or rejected , under the
provisions of sections one hundred and thirty and one hundred and thirty one of
the Probate Act. The undivided property of the deceased person may be listed to
administrators, and the taxes assessed are charges upon the property, which
should be paid as all necessary expenses in the care, management, and
settlement of the estate are paid.
And in Brown's Estate v. Hoge, (199 N.W., 320, 323), the Supreme Court of Iowa said
the following:
We think the federal tax is a charge or expense for which the estate is liable. We
think the lower court was right in holding that such tax was a part of the
expense of administration this tax should be deducted before computing the
state inheritance tax.
xxx xxx xxx
. . . The country court, in assessing the state inheritance tax on that property,
refused to deduct the federal estate tax paid by the executor, amounting to
P316,432.40. In the ruling the court erred. The federal estate tax is charge or an
expense against the estate of the decedent rather than against the shares of the
legatees or the distributees, and as part of the expense of administration this tax
be deducted before computing the state inheritance tax.
And in Corbin v. Townshend (103 A., 647, 649; 92 Conn., 501), the Supreme Court of
Connecticut said:
The federal tax imposed by Revenue Act Sept. 8, 1916, c. 463, Sec. 201, 39
Stat. 1000, on the transfer of the net estate of a decedent, being payable out of
the estate before distribution, and inheritance taxes imposed by other states on
the same basis, are expenses of administration, within Succession Act 1915, Sec.
5, providing for deduction of such expenses, to determine the net estate subject
to the succession tax; any expense arising by operation of law which is a charge
against or must be paid out of the estate being an administration expense.
It may perhaps be argued that if taxes and assessments owing to the Government or to
any of its branches or offices were not debts against a decedent which should be filed
with the committee on claims, section 735 would not have mentioned them as the fifth
in the enumeration. The answer to this is that the taxes and assessments specified in
the section are those which are not considered as administration expenses.
Considering what has already been decided by this Court in Pineda vs. Court of First
Instance of Tayabas, Knowles vs. Government of the Philippine Islands and Government
of the Philippine Islands vs. Pamintuan, supra, and the cited American precedents, I am
of the opinion that the credit of the Government presented in this case partakes of the
nature of necessary expenses of the administration and such enjoys preference; and
undersection 1588 of the Revised Administrative Code providing that an income tax
creates a legal lien superior to any other, it should be paid before that of Dr. de la Viña.
Avanceña, C. J., Laurel, JJ., concurs in the result

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 86355 May 31, 1990
JOSE MODEQUILLO, petitioner,

vs.
HON. AUGUSTO V. BREVA FRANCISCO SALINAS, FLORIPER ABELLAN-SALINAS,
JUANITO CULAN-CULAN and DEPUTY SHERIFF FERNANDO PLATA respondents.
Josefina Brandares-Almazan for petitioner.
ABC Law Offices for private respondents.
GANCAYCO, J.:
The issue in this petition is whether or not a final judgment of the Court of Appeals in an action for damages may be
satisfied by way of execution of a family home constituted under the Family Code.
The facts are undisputed.
On January 29, 1988, a judgment was rendered by the Court of Appeals in CA-G.R. CV
No. 09218 entitled "Francisco Salinas, et al. vs. Jose Modequillo, et al.," the dispositive
part of which read as follows:
WHEREFORE, the decision under appeal should be, as it is hereby,

reversed and set aside. Judgment is hereby rendered finding the
defendants-appellees Jose Modequillo and Benito Malubay jointly and
severally liable to plaintiffs-appellants as hereinbelow set forth.
Accordingly, defendants-appellees are ordered to pay jointly and severally
to:
1. Plaintiffs-appellants, the Salinas spouses:
a. the amount of P30,000.00 by way of compensation for the death of

their son Audie Salinas;
b. P10,000.00 for the loss of earnings by reason of the death of said Audie
Salinas;
c. the sum of P5,000.00 as burial expenses of Audie Salinas; and
d. the sum of P5,000.00 by way of moral damages.
2. Plaintiffs-appellants Culan-Culan:
a. the sum of P5,000.00 for hospitalization expenses of Renato Culan-

Culan; and
b. P5,000.00 for moral damages.
3. Both plaintiff-appellants Salinas and Culan-Culan, P7,000.00 for

attorney's fees and litigation expenses.
All counterclaims and other claims are hereby dismissed. 1
The said judgment having become final and executory, a writ of execution was issued
by the Regional Trial Court of Davao City to satisfy the said judgment on the goods and
chattels of the defendants Jose Modequillo and Benito Malubay at Malalag, Davao del
Sur.
On July 7, 1988, the sheriff levied on a parcel of residential land located at Poblacion
Malalag, Davao del Sur containing an area of 600 square meters with a market value of
P34,550.00 and assessed value of P7,570.00 per Tax Declaration No. 87008-01359,
registered in the name of Jose Modequillo in the office of the Provincial Assessor of
Davao del Sur; and a parcel of agricultural land located at Dalagbong Bulacan, Malalag,
Davao del Sur containing an area of 3 hectares with a market value of P24,130.00 and
assessed value of P9,650.00 per Tax Declaration No. 87-08-01848 registered in the
name of Jose Modequillo in the office of the Provincial Assessor of Davao del Sur. 2
A motion to quash and/or to set aside levy of execution was filed by defendant Jose
Modequillo alleging therein that the residential land located at Poblacion Malalag is
where the family home is built since 1969 prior to the commencement of this case and
as such is exempt from execution, forced sale or attachment under Articles 152 and
153 of the Family Code except for liabilities mentioned in Article 155 thereof, and that
the judgment debt sought to be enforced against the family home of defendant is not
one of those enumerated under Article 155 of the Family Code. As to the agricultural
land although it is declared in the name of defendant it is alleged to be still part of the
public land and the transfer in his favor by the original possessor and applicant who
was a member of a cultural minority was not approved by the proper government
agency. An opposition thereto was filed by the plaintiffs.
In an order dated August 26, 1988, the trial court denied the motion. A motion for
reconsideration thereof was filed by defendant and this was denied for lack of merit on
September 2, 1988.
Hence, the herein petition for review on certiorari wherein it is alleged that the trial
court erred and acted in excess of its jurisdiction in denying petitioner's motion to
quash and/or to set aside levy on the properties and in denying petitioner' motion for
reconsideration of the order dated August 26, 1988. Petitioner contends that only a
question of law is involved in this petition. He asserts that the residential house and lot
was first occupied as his family residence in 1969 and was duly constituted as a family
home under the Family Code which took effect on August 4, 1988. Thus, petitioner
argues that the said residential house and lot is exempt from payment of the obligation
enumerated in Article 155 of the Family Code; and that the decision in this case
pertaining to damages arising from a vehicular accident took place on March 16, 1976
and which became final in 1988 is not one of those instances enumerated under Article
155 of the Family Code when the family home may be levied upon and sold on
execution. It is further alleged that the trial court erred in holding that the said house
and lot became a family home only on August 4, 1988 when the Family Code became
effective, and that the Family Code cannot be interpreted in such a way that all family
residences are deemed to have been constituted as family homes at the time of their
occupancy prior to the effectivity of the said Code and that they are exempt from
execution for the payment of obligations incurred before the effectivity of said Code;
and that it also erred when it declared that Article 162 of the Family Code does not
state that the provisions of Chapter 2, Title V have a retroactive effect.
Articles 152 and 153 of the Family Code provide as follows:
Art. 152. The family home, constituted jointly by the husband and the
wife or by an unmarried head of a family, is the dwelling house where
they and their family reside, and the land on which it is situated.
Art. 153. The family home is deemed constituted on a house and lot from
the time it is occupied as a family residence. From the time of its
constitution and so long as any of its beneficiaries actually resides therein,
the family home continues to be such and is exempt from execution,
forced sale or attachment except as hereinafter provided and to the
extent of the value allowed by law.
Under the Family Code, a family home is deemed constituted on a house and lot from
the time it is occupied as a family residence. There is no need to constitute the same
judicially or extrajudicially as required in the Civil Code. If the family actually resides in
the premises, it is, therefore, a family home as contemplated by law. Thus, the
creditors should take the necessary precautions to protect their interest before
extending credit to the spouses or head of the family who owns the home.
Article 155 of the Family Code also provides as follows:
Art. 155. The family home shall be exempt from execution, forced sale or
attachment except:
(1) For non-payment of taxes;
(2) For debts incurred prior to the constitution of the family home;
(3) For debts secured by mortgages on the premises before or after such
constitution; and
(4) For debts due to laborers, mechanics, architects, builders, material

men and others who have rendered service or furnished material for the
construction of the building.
The exemption provided as aforestated is effective from the time of the constitution of
the family home as such, and lasts so long as any of its beneficiaries actually resides
therein.
In the present case, the residential house and lot of petitioner was not constituted as a
family home whether judicially or extrajudicially under the Civil Code. It became a
family home by operation of law only under Article 153 of the Family Code. It is
deemed constituted as a family home upon the effectivity of the Family Code on August
3, 1988 not August 4, one year after its publication in the Manila Chronicle on August 4,
1987 (1988 being a leap year).
The contention of petitioner that it should be considered a family home from the time it
was occupied by petitioner and his family in 1969 is not well- taken. Under Article 162
of the Family Code, it is provided that "the provisions of this Chapter shall also govern
existing family residences insofar as said provisions are applicable." It does not mean
that Articles 152 and 153 of said Code have a retroactive effect such that all existing
family residences are deemed to have been constituted as family homes at the time of
their occupation prior to the effectivity of the Family Code and are exempt from
execution for the payment of obligations incurred before the effectivity of the Family
Code. Article 162 simply means that all existing family residences at the time of the
effectivity of the Family Code, are considered family homes and are prospectively
entitled to the benefits accorded to a family home under the Family Code. Article 162
does not state that the provisions of Chapter 2, Title V have a retroactive effect.
Is the family home of petitioner exempt from execution of the money judgment
aforecited No. The debt or liability which was the basis of the judgment arose or was
incurred at the time of the vehicular accident on March 16, 1976 and the money
judgment arising therefrom was rendered by the appellate court on January 29, 1988.
Both preceded the effectivity of the Family Code on August 3, 1988. This case does not
fall under the exemptions from execution provided in the Family Code.
As to the agricultural land subject of the execution, the trial court correctly ruled that
the levy to be made by the sheriff shall be on whatever rights the petitioner may have
on the land.
WHEREFORE, the petition is DISMISSED for lack of merit. No pronouncement as to

costs.
SO ORDERED.
Narvasa (Chairman), Cruz and Medialdea, JJ., concur. Griño-Aquino, J., is on leave.
Footnotes
1 Madame Justice Lorna S. Lombosde la Fuente was

the ponente concurred in by Justices Antonio M. Martinez and Cecilio L.
Pe.
2 Pages 18-21, Rollo.

SUPREME COURT
Manila
EN BANC
G.R. No. L-13876 February 28, 1962
CONSOLACION FLORENTINO DE CRISOLOGO, ET AL., plaintiffs-appellees,

vs.
DR. MANUEL SINGSON, defendant-appellant.
Felix V. Vergara for defendant-appellant.

B. Martinez for plaintiffs-appellees.
DIZON, J.:
Action for partition commenced by the spouses Consolacion Florentino and Francisco
Crisologo against Manuel Singson in connection with a residential lot located a Plaridel
St., Vigan, Ilocos Sur, with an area of approximately 193 square meters, and the
improvements existing thereon, covered by Tax No. 10765-C. Their complaint alleged
that Singson owned one-half pro-indiviso of said property and that Consolacion
Florentino owned the other half by virtue of the provisions of the duly probated last will
of Dña. Leona Singson, the original owner, and the project of partition submitted to,
and approved by the Court of First Instance of Ilocos Sur in special Proceeding No. 453;
that plaintiffs had made demands for the partition of said property, but defendant
refused to accede thereto, thus compelling them to bring action.
Defendant's defense was that Consolacion Florentino was a mere usufructuary of, and
not owner of one-half pro-indiviso of the property in question, and that, therefore, she
was not entitled to demand partition thereof.
After trial upon the issue thus posed, the lower court rendered judgment as follows:
1. Declaring that the plaintiff is a co-owner pro-indiviso with the defendant of the
house and lot described in the complaint to the extent of each of an undivided
1/2 portion thereof; .
2. Ordering the aforesaid co-owners to execute an agreement of partition of the

said property within 30 days from receipt of this judgment unless it be shown
that the division thereof may render it unserviceable, in which case the
provisions of Art. 498 of the New Civil Code may be applied; . 1äwphï1.ñët
3. That in the event the said parties shall fail to do so, this Court will appoint the
corresponding commissioners to make the partition in accordance with law; and .
4. Without special pronouncement as to costs." .
From the above judgment, defendant Singson appealed.
It is admitted that Dña. Leona Singson, who died single on January 13, 1948, was the
owner of the property in question at the time of her death. On July 31, 1951 she
executed her last will which was admitted to probate in Special Proceeding No. 453 of
the lower court whose decision was affirmed by the Court of Appeals in G.R. No. 3605-
R. At the time of the execution of the will, her nearest living relatives were her brothers
Evaristo, Manuel and Dionisio Singson, her nieces Rosario, Emilia and Trinidad, and her
grandniece Consolation, all surnamed Florentino.
Clause IX of her last will reads as follows: .
NOVENO. — Ordeno que se de a mi nieta por parte de mi hermana mia y que al

mismo tiempo vive en mi casa, y, por tanto, bajo mi proteccion, y es la
CONSOLACION FLORENTINO: —
(A). La mitad de mi casa de materials fuertes con techo de hierro galvanizado,

incluyendo la mitad de su solar, ubicado en la Poblacion de Vigan, Ilocos Sur,
Calle Plaridel, actualmente arrendada por los hermanos Fortunato, Teofilo y
Pedro del appellido Kairuz. Pero si falleciere antes o despues que yo mi citada
nieta, esta propiedad se dara por partes iguales entre mis tres hermanos
Evaristo, Manuel y Dionisio, o a sus herederos forzosos en el caso de que alguno
de ellas murieie antes ... (Exhibit F.)
The issue to be decided is whether the testamentary disposition above-quoted provided

for what is called sustitucion vulgar or for a sustitucion fideicomisaria. This issue is, we
believe, controlled by the pertinent provisions of the Civil Code in force in the
Philippines prior to the effectivity of the New Civil Code, in view of the fact that the
testatrix died on January 13, 1948. They are the following: .
Art. 774. The testator may designate one or more persons to substitute the heir
or heirs instituted in case such heir or heirs should die before him, or should not
wish or should be unable to accept the inheritance.
A simple substitution, without a statement of the cases to which it is to apply,

shall include the three mentioned in the next preceeding paragraph, unless the
testator has otherwise provided:
Art. 781. Fidei-commissary substitutions by virtue of which the heir is charged to

preserve and transmit to a third person the whole or part of the inheritance shall
be valid and effective, provided they do not go beyond the second degree, or
that they are made in favor of persons living at the time of the death of the
testator." .
Art. 785. The following shall be inoperative: .
1. Fiduciary substitutions not made expressly, either by giving them this name or
by imposing upon the fiduciary the absolute obligation of delivering the property
to a second heir." ....
In accordance with the first legal provision quoted above, the testator may not only
designate the heirs who will succeed him upon his death, but also provide for
substitutes in the event that said heirs do not accept or are in no position to accept the
inheritance or legacies, or die ahead of him.
The testator may also bequeath his properties to a particular person with the obligation,
on the part of the latter, to deliver the same to another person, totally or partially,
upon the occurrence of a particular event (6 Manresa, p. 1112).
It is clear that the particular testamentary clause under consideration provides for a
substitution of the heir named therein in this manner: that upon the death of
Consolacion Florentino — whether this occurs before or after that of the testatrix — the
property bequeathed to her shall be delivered ("se dara") or shall belong in equal parts
to the testatrix's three brothers, Evaristo, Manuel and Dionisio, or their forced heirs,
should anyone of them die ahead of Consolacion Florentino. If this clause created what
is known as sustitucion vulgar, the necessary result would be that Consolacion
Florentino, upon the death of the testatrix, became the owner of one undivided half of
the property, but if it provided for a sustitution fideicomisaria, she would have acquired
nothing more than usufructuary rights over the same half. In the former case, she
would undoubtedly be entitled to partition, but not in the latter. As Manresa says, if the
fiduciary did not acquire full ownership of the property bequeathed by will, but mere
usufructuary rights thereon until the time came for him to deliver said property to the
fideicomisario, it is obvious that the nude ownership over the property, upon the death
of the testatrix, passed to and was acquired by another person, and the person cannot
be other than the fideicomisario (6 Manresa p. 145).
It seems to be of the essence of a fideicommissary substitution that an obligation be

clearly imposed upon the first heir to preserve and transmit to another the whole or
part of the estate bequeathed to him, upon his death or upon the happening of a
particular event. For this reason, Art. 785 of the old Civil Code provides that a
fideicommissary substitution shall have no effect unless it is made expressly ("de una
manera expresa") either by giving it such name, or by imposing upon the first heir the
absolute obligation ("obligacion terminante") to deliver the inheritance to a substitute
or second heir. In this connection Manresa says: .
Para que la sustitucion sea fideicomisaria, es preciso segun el art. 781, que se
ordeno o encargue al primer heredero, cuando sea tal, que conserve y transmita
a una tercera persona o entidad el todo a parte de la herencia. O lo que es lo
mismo, la sustitucion fideicomisaria, como declaran las resoluciones de 25 de
Junio de 1895, 10 de Febrero de 1899 y 19 de Julio de 1909, exige tres
requisitos: .
1.o Un primer heredero llamado al goce de los bienes preferentemente.
2.o Obligacion claramente impuesta al mismo de conservar y transmitir a un

tercero el todo o parte del caudal.
3.o Un segundo heredero.
A estos requisitos anade la sentencia de 18 de Noviembre de 1918, otro mas, el

del que el fideicomisario tenga derecho a los bienes de la herencia desde el
momento de la muerte del testador, puesto que ha de suceder a este y no al
fiduciario.
Por tanto, cuando el causante se limita a instituir dos herederos, y por
fallecimiento de ambos o de cualquiera de ellos, asigna la parte del fallecido o
fallecidos, a los herederos legitimos o a otras personas, solo existe una
sustitucion vulgar, porque falta el requisito de haberse impuesto a los primeros
herederos la obligacion de conservar y transmitir los bienes, y el articulo 789, en
su parrafo primero, evige que la sustitucion sea expresa, ya dandole el testador
el nombre de sustitucion fideicomisaria, ya imponiendo al sustituido la obligacion
terminante de conservar y transmitir los bienes a un segundo heredero.
A careful perusal of the testamentary clause under consideration shows that the
substitution of heirs provided for therein is not expressly made of the fideicommissary
kind, nor does it contain a clear statement to the effect that appellee, during her
lifetime, shall only enjoy usufructuary rights over the property bequeathed to her,
naked ownership thereof being vested in the brothers of the testatrix. As already
stated, it merely provides that upon appellee's death — whether this happens before or
after that of the testatrix — her share shall belong to the brothers of the testatrix.
In the light of the foregoing, we believe, and so hold, that the last will of the deceased
Dña. Leona Singson, established a mere sustitucion vulgar, the substitution Consolacion
Florentino by the brothers of the testatrix to be effective or to take place upon the
death of the former, whether it happens before or after that of the testatrix.
IN VIEW OF THE FOREGOING, the appealed judgment is affirmed, with costs.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera,
Paredes and De Leon, JJ., concur.
The Lawphil Project - Arellano Law Foundation

Supreme Court
Manila
SECOND DIVISION
DALISAY E. OCAMPO, VINCE E. G.R. No. 187879

OCAMPO, MELINDA CARLA E.
OCAMPO, and LEONARDO E.
Present:
OCAMPO, JR.,
Petitioners,
CARPIO, J.,
Chairperson,
NACHURA,
- versus -
PERALTA,
ABAD, and
MENDOZA, JJ.
RENATO M. OCAMPO and Promulgated:
ERLINDA M. OCAMPO,
Respondents.
July 5, 2010
x---------------------------------------------------------------------------
---------x
DECISION
NACHURA, J.:
This petition[1] for review on certiorari under Rule 45 of the

Rules of Court seeks to reverse and set aside the
Decision[2] dated December 16, 2008 and the Resolution[3]dated
April 30, 2009 of the Court of Appeals (CA) in CA-G.R. SP No.
104683. The Decision annulled and set aside the Order dated
March 13, 2008[4] of the Regional Trial Court (RTC), Branch 24,
Bian, Laguna, in Sp. Proc. No. B-3089; while the Resolution
denied the motion for reconsideration of the Decision.
The Antecedents
Petitioners Dalisay E. Ocampo (Dalisay), Vince E. Ocampo

(Vince), Melinda Carla E. Ocampo (Melinda), and Leonardo E.
Ocampo, Jr. (Leonardo, Jr.) are the surviving wife and the
children of Leonardo Ocampo (Leonardo), who died on January
23, 2004. Leonardo and his siblings, respondents Renato M.
Ocampo (Renato) and Erlinda M. Ocampo (Erlinda) are the
legitimate children and only heirs of the spouses Vicente and
Maxima Ocampo, who died intestate on December 19, 1972 and
February 19, 1996, respectively. Vicente and Maxima left several
properties, mostly situated in Bian, Laguna. Vicente and Maxima
left no will and no debts.
On June 24, 2004, five (5) months after the death of Leonardo,
petitioners initiated a petition for intestate proceedings,
entitled In Re: Intestate Proceedings of the Estate of Sps. Vicente
Ocampo and Maxima Mercado Ocampo, and Leonardo M.
Ocampo, in the RTC, Branch 24, Bian, Laguna, docketed as Spec.
Proc. No. B-3089.[5] The petition alleged that, upon the death of
Vicente and Maxima, respondents and their brother Leonardo
jointly controlled, managed, and administered the estate of their
parents. Under such circumstance, Leonardo had been receiving
his share consisting of one-third (1/3) of the total income
generated from the properties of the estate. However, when
Leonardo died, respondents took possession, control and
management of the properties to the exclusion of petitioners. The
petition prayed for the settlement of the estate of Vicente and
Maxima and the estate of Leonardo. It, likewise, prayed for the
appointment of an administrator to apportion, divide, and award
the two estates among the lawful heirs of the decedents.
Respondents filed their Opposition and Counter-Petition dated
October 7, 2004,[6] contending that the petition was defective as
it sought the judicial settlement of two estates in a single
proceeding. They argued that the settlement of the estate of
Leonardo was premature, the same being dependent only upon
the determination of his hereditary rights in the settlement of his
parents estate. In their counter-petition, respondents prayed that
they be appointed as special joint administrators of the estate of
Vicente and Maxima.
In an Order dated March 4, 2005,[7] the RTC denied respondents

opposition to the settlement proceedings but admitted their
counter-petition. The trial court also clarified that the judicial
settlement referred only to the properties of Vicente and Maxima.
Through a Motion for Appointment of Joint Special Administrators

dated October 11, 2005,[8] respondents reiterated their prayer for
appointment as special joint administrators of the estate, and to
serve as such without posting a bond.
In their Comment dated November 3, 2005,[9] petitioners argued

that, since April 2002, they had been deprived of their fair share
of the income of the estate, and that the appointment of
respondents as special joint administrators would further cause
injustice to them. Thus, they prayed that, in order to avoid
further delay, letters of administration to serve as joint
administrators of the subject estate be issued to respondents and
Dalisay.
In another Motion for Appointment of a Special
Administrator dated December 5, 2005,[10] petitioners nominated
the Bian Rural Bank to serve as special administrator pending
resolution of the motion for the issuance of the letters of
administration.
In its June 15, 2006 Order,[11] the RTC appointed Dalisay and
Renato as special joint administrators of the estate of the
deceased spouses, and required them to post a bond
of P200,000.00 each.[12]
Respondents filed a Motion for Reconsideration dated August
1, 2006[13] of the Order, insisting that Dalisay was incompetent
and unfit to be appointed as administrator of the estate,
considering that she even failed to take care of her husband
Leonardo when he was paralyzed in 1997. They also contended
that petitioners prayer for Dalisays appointment as special
administrator was already deemed abandoned upon their
nomination of the Bian Rural Bank to act as special administrator
of the estate.
In their Supplement to the Motion for

Reconsideration,[14] respondents asserted their priority in right to
be appointed as administrators being the next of kin of Vicente
and Maxima, whereas Dalisay was a mere daughter-in-law of the
decedents and not even a legal heir by right of representation
from her late husband Leonardo.
Pending the resolution of the Motion for Reconsideration,

petitioners filed a Motion to Submit Inventory and Accounting
dated November 20, 2006,[15] praying that the RTC issue an order
directing respondents to submit a true inventory of the estate of
the decedent spouses and to render an accounting thereof from
the time they took over the collection of the income of the estate.
Respondents filed their Comment and Manifestation dated

January 15, 2007,[16] claiming that they could not yet be
compelled to submit an inventory and render an accounting of the
income and assets of the estate inasmuch as there was still a
pending motion for reconsideration of the June 15, 2006 Order
appointing Dalisay as co-special administratrix with Renato.
In its Order dated February 16, 2007, the RTC revoked the
appointment of Dalisay as co-special administratrix, substituting
her with Erlinda. The RTC took into consideration the fact that
respondents were the nearest of kin of Vicente and
Maxima. Petitioners did not contest this Order and even
manifested in open court their desire for the speedy settlement of
the estate.
On April 23, 2007, or two (2) months after respondents

appointment as joint special administrators, petitioners filed a
Motion for an Inventory and to Render Account of the
Estate,[17] reiterating their stance that respondents, as joint
special administrators, should be directed to submit a true
inventory of the income and assets of the estate.
Respondents then filed a Motion for Exemption to File

Administrators Bond[18] on May 22, 2007, praying that they be
allowed to enter their duties as special administrators without the
need to file an administrators bond due to their difficulty in
raising the necessary amount. They alleged that, since petitioners
manifested in open court that they no longer object to the
appointment of respondents as special co-administrators, it would
be to the best interest of all the heirs that the estate be spared
from incurring unnecessary expenses in paying for the bond
premiums. They also assured the RTC that they would faithfully
exercise their duties as special administrators under pain of
contempt should they violate any undertaking in the performance
of the trust of their office.
In an Order dated June 29, 2007,[19] the RTC directed the parties
to submit their respective comments or oppositions to the
pending incidents, i.e., petitioners Motion for Inventory and to
Render Account, and respondents Motion for Exemption to File
Administrators Bond.
Respondents filed their Comment and/or Opposition,[20] stating

that they have already filed a comment on petitioners Motion for
Inventory and to Render Account. They asserted that the RTC
should, in the meantime, hold in abeyance the resolution of this
Motion, pending the resolution of their Motion for Exemption to
File Administrators Bond.
On October 15, 2007, or eight (8) months after the February 16,
2007 Order appointing respondents as special joint
administrators, petitioners filed a Motion to Terminate or Revoke
the Special Administration and to Proceed to Judicial Partition or
Appointment of Regular Administrator.[21] Petitioners contended
that the special administration was not necessary as the estate is
neither vast nor complex, the properties of the estate being
identified and undisputed, and not involved in any litigation
necessitating the representation of special
administrators. Petitioners, likewise, contended that respondents
had been resorting to the mode of special administration merely
to delay and prolong their deprivation of what was due
them. Petitioners cited an alleged fraudulent sale by respondents
of a real property for P2,700,000.00, which the latter represented
to petitioners to have been sold only for P1,500,000.00, and
respondents alleged misrepresentation that petitioners owed the
estate for the advances to cover the hospital expenses of
Leonardo, but, in fact, were not yet paid.
Respondents filed their Opposition and Comment[22] on March 10,
2008, to which, in turn, petitioners filed their Reply to
Opposition/Comment[23] on March 17, 2008.
In its Order dated March 13, 2008,[24] the RTC granted petitioners
Motion, revoking and terminating the appointment of Renato and
Erlinda as joint special administrators, on account of their failure
to comply with its Order, particularly the posting of the required
bond, and to enter their duties and responsibilities as special
administrators, i.e., the submission of an inventory of the
properties and of an income statement of the estate. The RTC
also appointed Melinda as regular administratrix, subject to the
posting of a bond in the amount of P200,000.00, and directed her
to submit an inventory of the properties and an income statement
of the subject estate. The RTC likewise found that judicial
partition may proceed after Melinda had assumed her duties and
responsibilities as regular administratrix.
Aggrieved, respondents filed a petition for certiorari[25] under Rule

65 of the Rules of Court before the CA, ascribing grave abuse of
discretion on the part of the RTC in (a) declaring them to have
failed to enter the office of special administration despite lapse of
reasonable time, when in truth they had not entered the office
because they were waiting for the resolution of their motion for
exemption from bond; (b) appointing Melinda as regular
administratrix, a mere granddaughter of Vicente and Maxima,
instead of them who, being the surviving children of the deceased
spouses, were the next of kin; and (c) declaring them to have
been unsuitable for the trust, despite lack of hearing and
evidence against them.
Petitioners filed their Comment to the Petition and Opposition to
Application for temporary restraining order and/or writ of
preliminary injunction,[26] reiterating their arguments in their
Motion for the revocation of respondents appointment as joint
special administrators. Respondents filed their Reply.[27]
On December 16, 2008, the CA rendered its assailed Decision

granting the petition based on the finding that the RTC gravely
abused its discretion in revoking respondents appointment as
joint special administrators without first ruling on their motion for
exemption from bond, and for appointing Melinda as regular
administratrix without conducting a formal hearing to determine
her competency to assume as such. According to the CA, the
posting of the bond is a prerequisite before respondents could
enter their duties and responsibilities as joint special
administrators, particularly their submission of an inventory of
the properties of the estate and an income statement thereon.
Petitioners filed a Motion for Reconsideration of the

Decision.[28] The CA, however, denied it. Hence, this petition,
ascribing to the CA errors of law and grave abuse of discretion for
annulling and setting aside the RTC Order dated March 13, 2008.
Our Ruling
The pertinent provisions relative to the special administration of

the decedents estate under the Rules of Court provide
Sec. 1. Appointment of special administrator. When there is

delay in granting letters testamentary or of administration by any
cause including an appeal from the allowance or disallowance of a will,
the court may appoint a special administrator to take possession and
charge of the estate of the deceased until the questions causing the
delay are decided and executors or administrators appointed.[29]
Sec. 2. Powers and duties of special administrator. Such special

administrator shall take possession and charge of goods, chattels,
rights, credits, and estate of the deceased and preserve the same for
the executor or administrator afterwards appointed, and for that
purpose may commence and maintain suits as administrator. He may
sell only such perishable and other property as the court orders sold. A
special administrator shall not be liable to pay any debts of the
deceased unless so ordered by the court.[30]
Sec. 1. Bond to be given before issuance of letters; Amount;

Conditions. Before an executor or administrator enters upon the
execution of his trust, and letters testamentary or of administration
issue, he shall give a bond, in such sum as the court directs,
conditioned as follows:
(a) To make and return to the court, within three (3) months, a
true and complete inventory of all goods, chattels, rights, credits, and
estate of the deceased which shall come to his possession or
knowledge or to the possession of any other person for him;
(b) To administer according to these rules, and, if an executor,

according to the will of the testator, all goods, chattels, rights, credits,
and estate which shall at any time come to his possession or to the
possession of any other person for him, and from the proceeds to pay
and discharge all debts, legacies, and charges on the same, or such
dividends thereon as shall be decreed by the court;
(c) To render a true and just account of his administration to the

court within one (1) year, and at any other time when required by the
court;
(d) To perform all orders of the court by him to be
performed.[31]
Sec. 4. Bond of special administrator. A special administrator

before entering upon the duties of his trust shall give a bond, in such
sum as the court directs, conditioned that he will make and return a
true inventory of the goods, chattels, rights, credits, and estate of the
deceased which come to his possession or knowledge, and that he will
truly account for such as are received by him when required by the
court, and will deliver the same to the person appointed executor or
administrator, or to such other person as may be authorized to receive
them.[32]
Inasmuch as there was a disagreement as to who should be

appointed as administrator of the estate of Vicente and Maxima,
the RTC, acting as a probate court, deemed it wise to appoint
joint special administrators pending the determination of the
person or persons to whom letters of administration may be
issued. The RTC was justified in doing so considering that such
disagreement caused undue delay in the issuance of letters of
administration, pursuant to Section 1 of Rule 80 of the Rules of
Court. Initially, the RTC, on June 15, 2006, appointed Renato and
Dalisay as joint special administrators, imposing upon each of
them the obligation to post an administrators bond
of P200,000.00. However, taking into account the arguments of
respondents that Dalisay was incompetent and unfit to assume
the office of a special administratrix and that Dalisay, in effect,
waived her appointment when petitioners nominated Bian Rural
Bank as special administrator, the RTC, on February 16, 2007,
revoked Dalisays appointment and substituted her with Erlinda.
A special administrator is an officer of the court who is
subject to its supervision and control, expected to work for the
best interest of the entire estate, with a view to its smooth
administration and speedy settlement.[33] When appointed, he or
she is not regarded as an agent or representative of the parties
suggesting the appointment.[34] The principal object of the
appointment of a temporary administrator is to preserve the
estate until it can pass to the hands of a person fully authorized
to administer it for the benefit of creditors and heirs, pursuant to
Section 2 of Rule 80 of the Rules of Court.[35]
While the RTC considered that respondents were the nearest

of kin to their deceased parents in their appointment as joint
special administrators, this is not a mandatory requirement for
the appointment. It has long been settled that the selection or
removal of special administrators is not governed by the rules
regarding the selection or removal of regular
administrators.[36] The probate court may appoint or remove
special administrators based on grounds other than those
enumerated in the Rules at its discretion, such that the need to
first pass upon and resolve the issues of fitness or
unfitness[37] and the application of the order of preference under
Section 6 of Rule 78,[38] as would be proper in the case of a
regular administrator, do not obtain. As long as the discretion is
exercised without grave abuse, and is based on reason, equity,
justice, and legal principles, interference by higher courts is
unwarranted.[39] The appointment or removal
of special administrators, being discretionary, is thus interlocutory
and may be assailed through a petition for certiorari under Rule
65 of the Rules of Court.[40]
Granting the certiorari petition, the CA found that the RTC

gravely abused its discretion in revoking respondents
appointment as joint special administrators, and for failing to first
resolve the pending Motion for Exemption to File Administrators
Bond, ratiocinating that the posting of the administrators bond is
a pre-requisite to respondents entering into the duties and
responsibilities of their designated office. This Court disagrees.
It is worthy of mention that, as early as October 11, 2005,

in their Motion for Appointment as Joint Special Administrators,
respondents already prayed for their exemption to post bond
should they be assigned as joint special administrators. However,
the RTC effectively denied this prayer when it issued its June 15,
2006 Order, designating Renato and Dalisay as special
administrators and enjoining them to post bond in the amount
of P200,000.00 each. This denial was, in effect, reiterated when
the RTC rendered its February 16, 2007 Order substituting
Dalisay with Erlinda as special administratrix.
Undeterred by the RTCs resolve to require them to post their

respective administrators bonds, respondents filed anew a Motion
for Exemption to File Administrators Bond on May 22, 2007,
positing that it would be to the best interest of the estate of their
deceased parents and all the heirs to spare the estate from
incurring the unnecessary expense of paying for their bond
premiums since they could not raise the money themselves. To
note, this Motion was filed only after petitioners filed a Motion for
an Inventory and to Render Account of the Estate on April 23,
2007. Respondents then argued that they could not enter into
their duties and responsibilities as special administrators in light
of the pendency of their motion for exemption. In other words,
they could not yet submit an inventory and render an account of
the income of the estate since they had not yet posted their
bonds.
Consequently, the RTC revoked respondents appointment as
special administrators for failing to post their administrators bond
and to submit an inventory and accounting as required of them,
tantamount to failing to comply with its lawful orders. Inarguably,
this was, again, a denial of respondents plea to assume their
office sans a bond. The RTC rightly did so.
Pursuant to Section 1 of Rule 81, the bond secures the

performance of the duties and obligations of an administrator
namely: (1) to administer the estate and pay the debts; (2) to
perform all judicial orders; (3) to account within one (1) year and
at any other time when required by the probate court; and (4) to
make an inventory within three (3) months. More specifically, per
Section 4 of the same Rule, the bond is conditioned on the
faithful execution of the administration of the decedents estate
requiring the special administrator to (1) make and return a true
inventory of the goods, chattels, rights, credits, and estate of the
deceased which come to his possession or knowledge; (2) truly
account for such as received by him when required by the court;
and (3) deliver the same to the person appointed as executor or
regular administrator, or to such other person as may be
authorized to receive them.
Verily, the administration bond is for the benefit of the

creditors and the heirs, as it compels the administrator, whether
regular or special, to perform the trust reposed in, and discharge
the obligations incumbent upon, him. Its object and purpose is to
safeguard the properties of the decedent, and, therefore, the
bond should not be considered as part of the necessary expenses
chargeable against the estate, not being included among the acts
constituting the care, management, and settlement of the
estate. Moreover, the ability to post the bond is in the nature of a
qualification for the office of administration.[41]
Hence, the RTC revoked respondents designation as joint
special administrators, especially considering that respondents
never denied that they have been in possession, charge, and
actual administration of the estate of Vicente and Maxima since
2002 up to the present, despite the assumption of Melinda as
regular administratrix. In fact, respondents also admitted that,
allegedly out of good faith and sincerity to observe transparency,
they had submitted a Statement of Cash Distribution[42] for the
period covering April 2002 to June 2006,[43] where they indicated
that Renato had received P4,241,676.00, Erlinda P4,164,526.96,
and petitioners P2,486,656.60, and that the estate had
advanced P2,700,000.00 for the hospital and funeral expenses of
Leonardo.[44] The latter cash advance was questioned by
petitioners in their motion for revocation of special administration
on account of the demand letter[45] dated June 20, 2007
of Asian Hospital and Medical Center addressed to Dalisay, stating
that there still remained unpaid hospital bills in the amount
of P2,087,380.49 since January 2004. Undeniably, respondents
had already been distributing the incomes or fruits generated
from the properties of the decedents estate, yet they still failed to
post their respective administrators bonds despite collection of
the advances from their supposed shares. This state of affairs
continued even after a considerable lapse of time from the
appointment of Renato as a special administrator of the estate on
June 15, 2006 and from February 16, 2007 when the RTC
substituted Erlinda, for Dalisay, as special administratrix.
What is more, respondents insincerity in administering the

estate was betrayed by the Deed of Conditional Sale dated
January 12, 2004[46] discovered by petitioners. This Deed was
executed between respondents, as the only heirs of Maxima, as
vendors, thus excluding the representing heirs of Leonardo, and
Spouses Marcus Jose B. Brillantes and Amelita Catalan-Brillantes,
incumbent lessors, as vendees, over a real property situated in
Bian, Laguna, and covered by Transfer Certificate of Title No. T-
332305 of the Registry of Deeds of Laguna, for a total purchase
price of P2,700,000.00. The Deed stipulated for a payment
of P1,500,000.00 upon the signing of the contract, and the
balance of P1,200,000.00 to be paid within one (1) month from
the receipt of title of the vendees. The contract also stated that
the previous contract of lease between the vendors and the
vendees shall no longer be effective; hence, the vendees were no
longer obligated to pay the monthly rentals on the property. And
yet there is a purported Deed of Absolute Sale[47] over the same
realty between respondents, and including Leonardo as
represented by Dalisay, as vendors, and the same spouses, as
vendees, for a purchase price of only P1,500,000.00. Notably,
this Deed of Absolute Sale already had the signatures of
respondents and vendee-spouses. Petitioners claimed that
respondents were coaxing Dalisay into signing the same, while
respondents said that Dalisay already got a share from this
transaction in the amount of P500,000.00. It may also be
observed that the time of the execution of this Deed of Absolute
Sale, although not notarized as the Deed of Conditional Sale,
might not have been distant from the execution of the latter
Deed, considering the similar Community Tax Certificate Numbers
of the parties appearing in both contracts.
Given these circumstances, this Court finds no grave abuse

of discretion on the part of the RTC when it revoked the
appointment of respondents as joint special administrators, the
removal being grounded on reason, equity, justice, and legal
principle. Indeed, even if special administrators had already been
appointed, once the probate court finds the appointees no longer
entitled to its confidence, it is justified in withdrawing the
appointment and giving no valid effect thereto.[48]
On the other hand, the Court finds the RTCs designation of
Melinda as regular administratrix improper and abusive of its
discretion.
In the determination of the person to be appointed as

regular administrator, the following provisions of Rule 78 of the
Rules of Court, state
Sec. 1. Who are incompetent to serve as executors or

administrators. No person is competent to serve as executor or
administrator who:
(a) Is a minor;
(b) Is not a resident of the Philippines; and
(c) Is in the opinion of the court unfit to execute the duties of

the trust by reason of drunkenness, improvidence, or want of
understanding or integrity, or by reason of conviction of an offense
involving moral turpitude.
xxxx
Sec. 6. When and to whom letters of administration granted. If

no executor is named in the will, or the executor or executors are
incompetent, refuse the trust, or fail to give bond, or a person dies
intestate, administration shall be granted:
(a) To the surviving husband or wife, as the case may be, or
next of kin, or both, in the discretion of the court, or to such person as
such surviving husband or wife, or next of kin, requests to have
appointed, if competent and willing to serve;
(b) If such surviving husband or wife, as the case may be, or

next of kin, or the person selected by them, be incompetent or
unwilling, or if the husband or widow, or next of kin, neglects for thirty
(30) days after the death of the person to apply for administration or
to request that administration be granted to some other person, it may
be granted to one or more of the principal creditors, if competent and
willing to serve;
(c) If there is no such creditor competent and willing to serve, it

may be granted to such other person as the court may select.
Further, on the matter of contest for the issuance of letters

of administration, the following provisions of Rule 79 are
pertinent
Sec. 2. Contents of petition for letters of administration. A

petition for letters of administration must be filed by an interested
person and must show, so far as known to the petitioner:
(a) The jurisdictional facts;
(b) The names, ages, and residences of the heirs, and the
names and residences of the creditors, of the decedent;
(c) The probable value and character of the property of the
estate;
(d) The name of the person for whom letters of

administration are prayed.
But no defect in the petition shall render void the issuance of

letters of administration.
Sec. 3. Court to set time for hearing. Notice thereof. When a

petition for letters of administration is filed in the court having
jurisdiction, such court shall fix a time and place for hearing the
petition, and shall cause notice thereof to be given to the known heirs
and creditors of the decedent, and to any other persons believed to
have an interest in the estate, in the manner provided in Sections 3
and 4 of Rule 76.
Sec. 4. Opposition to petition for administration. Any interested

person may, by filing a written opposition, contest the petition on the
ground of the incompetency of the person for whom letters are prayed
therein, or on the ground of the contestants own right to the
administration, and may pray that letters issue to himself, or to any
competent person or persons named in the opposition.
Sec. 5. Hearing and order for letters to issue. At the hearing of

the petition, it must first be shown that notice has been given as
herein-above required, and thereafter the court shall hear the proofs
of the parties in support of their respective allegations, and if satisfied
that the decedent left no will, or that there is no competent and willing
executor, it shall order the issuance of letters of administration to the
party best entitled thereto.
Admittedly, there was no petition for letters of
administration with respect to Melinda, as the prayer for her
appointment as co-administrator was embodied in the motion for
the termination of the special administration. Although there was
a hearing set for the motion on November 5, 2007, the same was
canceled and reset to February 8, 2008 due to the absence of the
parties counsels. The February 8, 2008 hearing was again
deferred to March 10, 2008 on account of the ongoing renovation
of the Hall of Justice. Despite the resetting, petitioners filed a
Manifestation/Motion dated February 29, 2008,[49] reiterating
their prayer for partition or for the appointment of Melinda as
regular administrator and for the revocation of the special
administration. It may be mentioned that, despite the filing by
respondents of their Opposition and Comment to the motion to
revoke the special administration, the prayer for the appointment
of Melinda as regular administratrix of the estate was not
specifically traversed in the said pleading. Thus, the capacity,
competency, and legality of Melindas appointment as such was
not properly objected to by respondents despite being the next of
kin to the decedent spouses, and was not threshed out by the
RTC acting as a probate court in accordance with the above
mentioned Rules.
However, having in mind the objective of facilitating the

settlement of the estate of Vicente and Maxima, with a view to
putting an end to the squabbles of the heirs, we take into account
the fact that Melinda, pursuant to the RTC Order dated March 13,
2008, already posted the required bond of P200,000.00 on March
26, 2008, by virtue of which, Letters of Administration were
issued to her the following day, and that she filed an Inventory of
the Properties of the Estate dated April 15, 2008.[50] These acts
clearly manifested her intention to serve willingly as
administratrix of the decedents estate, but her appointment
should be converted into one of special administration, pending
the proceedings for regular administration. Furthermore, since it
appears that the only unpaid obligation is the hospital bill due
from Leonardos estate, which is not subject of this case, judicial
partition may then proceed with dispatch.
WHEREFORE, the petition is PARTIALLY GRANTED. The

Decision dated December 16, 2008 and the Resolution dated April
30, 2009 of the Court of Appeals in CA-G.R. SP No. 104683
are AFFIRMED with the MODIFICATION that the Order dated
March 13, 2008 of the Regional Trial Court, Branch 24, Bian,
Laguna, with respect to the revocation of the special
administration in favor of Renato M. Ocampo and Erlinda M.
Ocampo, is REINSTATED. The appointment of Melinda Carla E.
Ocampo as regular administratrix is SET ASIDE. Melinda is
designated instead as special administratrix of the estate under
the same administrators bond she had posted. The trial court is
directed to conduct with dispatch the proceedings for the
appointment of the regular administrator and, thereafter, to
proceed with judicial partition. No costs.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA

Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
DIOSDADO M. PERALTA ROBERTO A. ABAD
JOSE CATRAL MENDOZA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been

reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the

Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts
Division.
RENATO C. CORONA
Chief Justice
[1]
Rollo, pp. 12-33.
[2]
Penned by Associate Justice Ramon R. Garcia, with Associate Justices Josefina Guevara-
Salonga and Magdangal M. de Leon, concurring; id. at 34-51.
[3]
Id. at 52-53.
[4]
Id. at 54-55.
[5]
Id. at 35-36.
[6]
Id. at 36.
[7]
Id. at 36-37.
[8]
Id. at 37.
[9]
Id.
[10]
Id.
[11]
Id.
[12]
As admitted by respondents in their Petition for Certiorari with Urgent Prayer for the
Issuance of a Temporary Restraining Order and/or Preliminary Injunction; id. at 86.
[13]
Id. at 38.
[14]
Id.
[15]
Id.
[16]
Id. at 39.
[17]
Id.
[18]
Id. at 40.
[19]
Id.
[20]
Id. at 40-41.
[21]
Id. at 56-63.
[22]
Id. at 71-75.
[23]
Id. at 76-80.
[24]
Id. at 54-55.
[25]
Id. at 81-107.
[26]
Id. at 108-132.
[27]
Id. at 142-145.
[28]
Id. at 146-155.
[29]
Rule 80.
[30]
Id.
[31]
Rule 81.
[32]
Id.
Co v. Rosario, G.R. No. 160671, April 30, 2008, 553 SCRA 225, 229.
[33]
Heirs of Belinda Dahlia A. Castillo v. Lacuata-Gabriel, G.R. No. 162934, November 11,
[34]
2005, 474 SCRA 747, 757; Valarao v. Pascual, 441 Phil. 226, 238 (2002).
[35]
Tan v. Gedorio, Jr., G.R. No. 166520, March 14, 2008, 548 SCRA 528, 537.
[36]
Co v. Rosario, supra note 33, at 228; Tan v. Gedorio, Jr., supra, at 536; Heirs of Belinda
Dahlia A. Castillo v. Lacuata-Gabriel, supra note 34, at 760; Pijuan v. De Gurrea, 124 Phil.
1527, 1531-1532 (1966); Roxas v. Pecson, 82 Phil. 407, 410 (1948).
[37]
Co v. Rosario, supra note 33, at 228; Rivera v. Hon. Santos, et al., 124 Phil. 1557, 1561
(1966).
[38]
Infra.
[39]
Co v. Rosario, supra note 33, at 228; Fule v. Court of Appeals, 165 Phil. 785, 800
(1976).
[40]
Tan v. Gedorio, Jr., supra note 35, at 536; Jamero v. Melicor, 498 Phil. 158, 165-166
(2005).
[41]
Commissioner of Internal Revenue v. Court of Appeals, 385 Phil. 397, 409
(2000); Moran Sison v. Teodoro, 100 Phil. 1055, 1058 (1957); Sulit v. Santos, 56 Phil. 626,
630 (1932).
[42]
Annex N to the Petition for Certiorari before the CA.
[43]
Per respondents Petition for Certiorari before the CA; rollo, p. 96.
[44]
Per petitioners Comment to the petition before the CA; id. at 114.
[45]
Id. at 64-65.
[46]
Id. at 66-67.
[47]
Id. at 68-70.
[48]
Co v. Rosario, supra note 33, at 228-229.
[49]
Rollo, p. 41.
[50]
As admitted by respondents in their Comment; id. at 165-166.

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EN BANC

MANILA INTERNATIONAL G.R. No. 155650

COURT OF APPEALS, CITY OF TINGA,

PARAAQUE, CITY MAYOR OF CHICO-NAZARIO,

PANGLUNGSOD NG PARAAQUE, VELASCO, JR., JJ.

CITY ASSESSOR OF PARAAQUE,

Respondents. July 20, 2006

Petitioner Manila International Airport Authority (MIAA)

As operator of the international airport, MIAA administers

On 21 March 1997, the Office of the Government

On 28 June 2001, MIAA received Final Notices of Real

TAX DECLARATION TAXABLEYEAR 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-016-01380 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 P392,435,861.95 P232,070,863.47 P 624,506,725.42

#9476101 for P28,676,480.00

#9476103 for P49,115.00[6]

On 17 July 2001, the City of Paraaque, through its City Treasurer,

On 1 October 2001, MIAA filed with the Court of Appeals

Meanwhile, in January 2003, the City of Paraaque posted notices

A day before the public auction, or on 6 February 2003, at 5:10

On 7 February 2003, this Court issued a temporary

On 29 March 2005, the Court heard the parties in oral arguments.

Respondents invoke Section 193 of the Local Government Code,

Respondents also cite the ruling of this Court

that the Local Government Code has withdrawn the exemption

The Courts Ruling

First, MIAA is not a government-owned or controlled corporation

1. MIAA is Not a Government-Owned or Controlled

There is no dispute that a government-owned or controlled

SEC. 2. General Terms Defined. x x x x

(13) Government-owned or controlled corporation refers to any

A government-owned or controlled corporation must

SECTION 10. Capital. The capital of the Authority to be

(a) The value of fixed assets including airport facilities,

(b) That the amount of P605 million as of December 31, 1986

Section 3 of the Corporation Code[10] defines a stock

MIAA is also not a non-stock corporation because it has

Section 88 of the Corporation Code provides that non-

Since MIAA is neither a stock nor a non-stock corporation,

SEC. 2. General Terms Defined. x x x x

(10) Instrumentality refers to any agency of the National

When the law vests in a government instrumentality

Many government instrumentalities are vested with

A government instrumentality like MIAA falls under

SEC. 133. Common Limitations on the Taxing Powers of Local

(o) Taxes, fees or charges of any kind on the

Section 133(o) recognizes the basic principle that local

When local governments invoke the power to tax on

Another rule is that a tax exemption is strictly construed

There is, moreover, no point in national and local governments

There is also no reason for local governments to tax national

Thus, Section 133 of the Local Government Code states

This doctrine emanates from the supremacy of the National

Justice Holmes, speaking for the Supreme Court,

Otherwise, mere creatures of the State can defeat National