Title
Manila International Airport Authority vs. Court of Appeals
Case
G.R. No. 155650
Decision Date
Jul 20, 2006
MIAA, an instrumentality of the National Government, is exempt from real estate tax as its Airport Lands and Buildings are owned by the Republic and used for public purposes.

Case Summary (G.R. No. 155650)

Tax assessments, OGCC opinions and municipal enforcement

Following OGCC Opinion No. 061 (21 March 1997) interpreting that the Local Government Code withdrew MIAA’s real estate tax exemption, MIAA negotiated with the City of ParaAaque and made some tax payments. The City later issued Final Notices of Real Estate Tax Delinquency covering taxable years 1992–2001, showing aggregate assessments (taxes, penalties, totals) for numerous tax declarations and a grand total stated in the record. The City issued notices of levy and warrants of levy on MIAA property and scheduled a public auction; the City threatened auction if delinquency persisted.

Procedural history before the courts

MIAA filed an original petition for prohibition and injunction with the Court of Appeals to restrain the City from taxing, levying upon, and auctioning the airport properties; the Court of Appeals dismissed the petition as filed beyond the 60-day reglementary period. MIAA sought relief in the Supreme Court by petition for review and later filed an urgent ex-parte motion for a TRO to stop the scheduled auction. The Supreme Court issued a TRO on 7 February 2003 but respondents received the TRO after the auction concluded; the TRO was confirmed nunc pro tunc on 10 February 2003. The parties later submitted memoranda and were heard.

Legal question presented

Whether MIAA’s Airport Lands and Buildings are exempt from local real estate tax, thereby voiding the City of ParaAaque’s tax assessments and any auction or levy predicated on those assessments. If exempt, other issues become moot.

MIAA’s principal legal contentions

MIAA asserted it is an instrumentality of the national government, not a government-owned or controlled corporation (GOCC), and that the Airport Lands and Buildings are devoted to public use and remain owned by the State (Republic of the Philippines). MIAA relied on: (a) the MIAA Charter’s transfer of title to MIAA while indicating presidential control over disposition; (b) principles that government cannot tax itself and that property devoted to public use is outside the commerce of man; (c) Section 21 of the MIAA Charter and Section 234 of the Local Government Code as bases for exemption; and (d) the proposition that only portions leased to private taxable persons are subject to local real estate tax.

Respondents’ principal legal contentions

Respondents argued that MIAA is a GOCC whose tax exemption was withdrawn by Section 193 of the Local Government Code, and they invoked Section 193 and Section 193’s explicit withdrawal of exemptions enjoyed by “all persons, whether natural or juridical, including government-owned or controlled corporations.” They also relied on precedent (Mactan International Airport v. Marcos) holding that the Local Government Code withdrew exemption of international airports and argued estoppel based on MIAA’s prior tax payments.

Supreme Court’s threshold holdings — MIAA’s status and taxing power limits

The Court held MIAA is not a government-owned or controlled corporation as defined in the Administrative Code because it is not organized as a stock or non-stock corporation with capital stock or members as required by that definition. Instead, MIAA is a government instrumentality vested with corporate powers and operational autonomy under Section 2(10) of the Administrative Code. Under Section 133(o) of the Local Government Code, local governments are generally precluded from levying taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, unless “otherwise provided in this Code.” The Court emphasized that any doubt as to taxing power against national instrumentalities must be resolved against local governments, and that exemptions granted to national instrumentalities by Congress should be construed liberally in favor of the national government.

Supreme Court’s holdings — ownership and character of airport lands

The Court ruled that MIAA’s Airport Lands and Buildings are properties of public dominion, intended for public use (airports as “ports constructed by the State”), and thus owned by the Republic of the Philippines under Civil Code Articles 419–422. Properties of public dominion are outside the commerce of man, inalienable unless withdrawn from public use by law or presidential proclamation, and not subject to levy, foreclosure or auction. The MIAA Charter’s transfer and retention provisions — including limitations on disposition without presidential approval and the charter’s transference mechanism from the Bureau of Air Transportation — supported the view that the Republic retained beneficial ownership and that MIAA holds title in trust or as trustee for the Republic.

Application of the Local Government Code exemptions (Sections 133(o) and 234(a))

Reading Section 133(o) together with Section 234(a), the Court held the operative exemption in the Local Government Code protects real property owned by the Republic from local real estate tax, except when the beneficial use has been granted, for consideration or otherwise, to a taxable person. Because MIAA is a national government instrumentality (not a taxable person under Section 133(o)), and the Airport Lands and Buildings are properties of public dominion owned by the Republic, the general rule is exemption from real estate tax. The Court clarified that only portions of airport land where MIAA has granted beneficial use to private, taxable lessees (for example, private hangars leased to private entities) lose the exemption and are subject to real estate tax.

Refutation of contrary interpretations and minority arguments

The majority addressed the minority’s contention that Section 193’s blanket withdrawal of tax exemptions for “all persons, whether natural or juridical” deprived MIAA of exemption. The Court explained Section 193 is subject to its own qualifying clause “unless otherwise provided in this Code,” and that Section 133(o) specifically bars municipalities and cities from taxing the national government and its instrumentalities unless the Code expressly provides otherwise. Section 234(a) was identif

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