MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001. MIAA’s real estate tax delinquency was estimated at P624 million.
The City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency.
MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Parañaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings.
Paranaque’s Contention: Section 193 of the Local Government Code expressly withdrew the tax exemption privileges of “government-owned and-controlled corporations” upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.
MIAA’s contention: Airport Lands and Buildings are owned by the Republic. The government cannot tax itself. 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.
Whether Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws?
Yes. Ergo, the real estate tax assessments issued by the City of Parañaque, and all proceedings taken pursuant to such assessments, are void.
1. MIAA is Not a Government-Owned or Controlled Corporation
MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation.
MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares.
MIAA is also not a non-stock corporation because it has no members. A non-stock corporation must have members.
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.
When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, 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.”
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.
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 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.” The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user’s tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.
Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.
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. n MIAA’s case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.
d. Transfer to MIAA was Meant to Implement a Reorganization
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA’s assets adverse to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Sec 234 of the LGC provides that 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 following are exempted from payment of the real property 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.