Case Summary (G.R. No. 45685)
Petitioner and Respondents
Petitioner: Philippine Fisheries Development Authority
Respondents: Court of Appeals; Office of the President; Department of Finance; City of Iloilo
Key Dates
– August 11, 1976: PD 977 creates PFDA under Ministry of Natural Resources
– February 8, 1982: EO 772 renames and reattaches PFDA to Ministry (later Department) of Agriculture
– October 31, 1981: Reclamation of 21 ha in Barangay Tanza, Iloilo City, for IFPC
– May 1988: City of Iloilo assesses IFPC for real property taxes (delinquency P5,057,349.67 for 1988–1989)
– August 30, 1990: Public auction scheduled to satisfy tax delinquency; PFDA seeks injunction and administrative exemption
– March 6, 1992: DOF rules PFDA liable for real property tax on beneficial use but only PFDA‐owned property may be auctioned
– June 21, 2005: Court of Appeals affirms denial of exemption and permits auction of IFPC
– July 31, 2007: Supreme Court issues final decision
Applicable Law
– 1987 Philippine Constitution (applies to decisions from 1990 onward)
– Presidential Decree No. 977 (PD 977), Executive Orders No. 772 and 292 (Administrative Code)
– Local Government Code (LGC) §§ 133(o) (general exemption for national instrumentalities) and 234(a) (real property tax exception on beneficial use by taxable persons)
– Civil Code, Article 420 (public dominion)
– Jurisprudence distinguishing government‐owned or controlled corporations (GOCCs) from instrumentalities (MIAA v. CA, G.R. No. 155650)
Factual Background
The Ministry of Public Works reclaimed a 21-hectare foreshore in Barangay Tanza and constructed the Iloilo Fishing Port Complex (IFPC), including breakwater, landing quay, refrigeration, market and administration facilities. Title remained with the Republic, but PFDA took governance and operation under PD 977. PFDA subsequently leased portions of IFPC to private fishing-related businesses.
Procedural History
After City of Iloilo assessed the entire IFPC for 1988–1989 real property taxes and moved to auction it for unpaid taxes, PFDA sought injunctive relief and administrative tax exemption. The Iloilo Assessor and then the DOF denied exemption, holding PFDA liable for taxes on property it beneficially used. PFDA’s appeal to the Office of the President was likewise dismissed. The Court of Appeals affirmed and allowed auction of IFPC to satisfy the tax delinquency. PFDA petitioned the Supreme Court.
Issues
- Is PFDA liable to pay real property tax on IFPC?
- If so, may the entire IFPC be sold at public auction to satisfy the delinquency?
Classification as an Instrumentality, Not a GOCC
Under MIAA v. Court of Appeals, an entity is a GOCC only if organized as a stock or non-stock corporation. PFDA’s capital stock is unsubscribed and undivided into shares, and it has no members or distributable dividends; it therefore is not a GOCC. It remains an instrumentality of the national government, vested with governmental and corporate powers under its charter.
Tax Exemption and Limited Liability
Section 133(o) of the LGC grants national instrumentalities broad exemption from local taxation, “unless otherwise provided in this Code.” Section 234(a) creates a single exception: real property owned by the Republic that is granted for the beneficial use of a taxable person becomes subject to real property tax. PFDA’s leases to private entities constituted “beneficial use” by taxable persons, rendering those portions taxable, while the remainder of IFPC remains exempt.
Public Dominion and Prohibition on Auction Sale
Civil Code Article 420 classifies ports and reclaimed lands as property of public dominion, immune from sa
Case Syllabus (G.R. No. 45685)
Facts
- Presidential Decree No. 977 (Aug. 11, 1976) created the Philippine Fisheries Development Authority (“Authority”), under the Secretary of Natural Resources.
- Executive Order No. 772 (Feb. 8, 1982) amended PD 977, renamed the agency, and attached it to the Ministry of Natural Resources; under the Administrative Code (EO 292), it became attached to the Department of Agriculture.
- On October 31, 1981, the Ministry of Public Works and Highways reclaimed a 21-hectare parcel in Barangay Tanza, Iloilo City, and constructed the Iloilo Fishing Port Complex (IFPC).
- Upon completion, the Ministry turned over the IFPC’s operation and governance to the Authority (Sec. 11, PD 977), but legal title to the land and buildings remained with the Republic.
- The Authority leased portions of the IFPC to private fishing-related businesses.
- In May 1988, the City of Iloilo assessed the entire IFPC for real property taxes; by end of 1989, the Authority’s delinquency, with penalties and interest, reached ₱5,057,349.67.
- The City scheduled a public auction of the IFPC on August 30, 1990; the Authority sought injunctive relief and agreed to administrative proceedings for tax exemption.
- The City Assessor denied exemption; the Authority appealed to the Department of Finance (DOF), which on March 6, 1992 ruled the Authority liable because of its beneficial use but held that only Authority-owned property, not the IFPC, could be auctioned.
- The Authority’s petition to the Office of the President was dismissed, and its motion for reconsideration denied.
- On appe