Case Summary (G.R. No. 204039)
Procedural History
PRA was assessed for alleged delinquencies in real property taxes for tax years 2001–2002; warrants of levy and an auction sale (April 7, 2003) ensued. PRA sought injunctive relief before the RTC in 2003; the RTC denied the TRO and later deemed a preliminary injunction moot after the auction. In 2009 PRA moved for leave to file a supplemental petition contesting the assessments, levy, sale, and certificates of sale. The RTC dismissed PRA’s petition on January 8, 2010, ruling PRA was a GOCC and thus not exempt from local real property taxation under the LGC. PRA filed a petition for review on certiorari under Rule 45 to the Supreme Court.
Facts Relevant to the Dispute
PRA reclaimed portions of foreshore and offshore areas of Manila Bay located in Parañaque City and obtained titles (OCT/TCT) in its name over several parcels. The Parañaque City Assessor assessed delinquent real property taxes for 2001–2002, leading to warrants of levy issued by the City Treasurer and an eventual public auction. PRA asserts the lands remain part of the public domain and that PRA is an incorporated instrumentality exempt from local real property taxes; the City contends PRA represented itself as a GOCC and therefore is taxable under Section 193 of the LGC.
Legal Issues Presented
- Whether PRA is a government-owned or controlled corporation (GOCC) or an incorporated instrumentality of the national government; and 2) whether the reclaimed lands held/titled in PRA’s name remain part of the public domain and are exempt from local real property taxation under the Local Government Code (LGC) and the Constitution.
Petitioner’s Contentions (PRA)
PRA argues it is an incorporated government instrumentality vested with corporate powers but not organized as a stock or non-stock corporation under the Corporation Code; therefore it is not a GOCC. PRA contends it is not authorized to distribute dividends or surplus to stockholders, lacks members required for a non-stock corporation, and was created to perform an essential public service rather than to engage in economic competition. PRA further insists the reclaimed lands are part of the public domain, retained as public lands while held by PRA, and therefore are exempt from real property tax unless the beneficial use has been granted to a taxable person.
Respondent’s Contentions (City of Parañaque)
The City argues PRA has consistently represented itself as a GOCC, pointing to P.D. No. 1084 (PRA’s charter), PRA’s admissions in pleadings, and the fact that PRA has an authorized capital stock and subscribed shares. The City invokes Section 193 of the LGC to argue that tax exemption privileges of GOCCs were withdrawn and that PRA, being a GOCC, is therefore subject to local real property tax.
Relevant Statutory and Constitutional Framework
Applicable constitution: 1987 Philippine Constitution. Pertinent provisions and statutes cited: Section 16, Article XII of the 1987 Constitution (GOCC creation subject to common good and economic viability); Administrative Code of 1987 definitions — Section 2(13) (definition of GOCC) and Section 2(10) (definition of instrumentality); Corporation Code provisions defining stock (Section 3) and non-stock (Sections 87–88) corporations; Local Government Code (R.A. No. 7160) — Section 234(a) (exemptions from real property tax) and Section 133(o) (limits on local taxing powers); relevant precedents: Manila International Airport Authority v. Court of Appeals and Chavez v. Public Estates Authority, as discussed by the Court.
Court’s Analysis — Distinguishing GOCC from Government Instrumentality
The Court applied the Administrative Code definitions and Corporation Code requisites to conclude that a GOCC must be organized as a stock or non-stock corporation. A stock corporation requires both capital stock divided into shares and authorization to distribute dividends/surplus; a non-stock corporation requires members and is organized for enumerated charitable, professional, cultural, or similar purposes. Although PRA’s charter provides for an authorized capital stock, PRA is not authorized to distribute dividends or surplus to stockholders and lacks members required of a non-stock corporation. Consequently, PRA is not a GOCC under Section 2(13) of the Administrative Code. The Court further invoked Section 16, Article XII of the 1987 Constitution, explaining that entities created to perform essential public services and not to compete in the market need not meet the economic viability test required for GOCCs established by special charter; PRA’s purposes (coordinated reclamation and administration of government lands for public interest) are public-service oriented, not commercial, so PRA functions as an incorporated instrumentality vested with corporate powers under Section 2(10) of the Administrative Code.
Court’s Analysis — Tax Exemption and Public Domain Status of Reclaimed Lands
The Court analyzed Section 234(a) of the LGC, which exempts real property owned by the Republic from real property tax unless beneficial use has been granted to a taxable person, and Section 133(o), which restrains local governments from levying taxes on the national government and its instrumentalities. The Court emphasized the Administrative Code provision allowing public domain property to be titled in the name of agencies or instrumentalities without converting ownership from the Republic to private ownership. Citing Chavez v. Public Estates Authority and related jurisprudence, the Court held that foreshore and submerged areas of Manila Bay are lands of the public domain under Article XII, Section 2 of the Constitution and Civil Code Article 420; reclamation and issuance of titles to an entity like PRA do not automatically convert such lands into private property. Reclaimed land
...continue readingCase Syllabus (G.R. No. 204039)
Citation and Court
- Supreme Court of the Philippines, Third Division, G.R. No. 191109, reported at 691 Phil. 476.
- Decision promulgated July 18, 2012.
- Decision authored by Justice Mendoza; concurred in by Peralta (Acting Chairperson), Del Castillo, Abad, and Perlas-Bernabe, JJ.
- Designated Additional Member noted: Justice Abad designated in lieu of Associate Justice Presbitero J. Velasco, Jr., per raffle dated July 18, 2012.
Nature of the Case and Relief Sought
- Petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure.
- Pure questions of law presented on whether the Philippine Reclamation Authority (PRA) is exempt from real property taxation.
- Relief sought by petitioner PRA: annulment of real property tax assessments, levy, the public auction sale of April 7, 2003, and Certificates of Sale issued to the City of ParaAaque.
- The petition assails the January 8, 2010 Order of the Regional Trial Court (RTC), Branch 195, ParaAaque City, which ruled that PRA is a government-owned and controlled corporation (GOCC), taxable, and not exempt from real property taxes.
Procedural History — Key Judicial Events
- February 19, 2003: ParaAaque City Treasurer Liberato M. Carabeo issued Warrants of Levy on PRA’s reclaimed properties for alleged delinquent real property taxes for tax years 2001 and 2002, following City Assessor Soledad Medina Cue’s assessment.
- March 26, 2003: PRA filed a petition for prohibition with prayer for TRO and/or writ of preliminary injunction before the RTC.
- April 3, 2003: RTC denied PRA’s petition for a temporary restraining order after hearing.
- April 4, 2003: PRA requested Carabeo to defer the April 7, 2003 public auction; Carabeo refused citing RTC denial of TRO.
- April 7, 2003: Public auction of subject reclaimed properties was consummated.
- April 25, 2003: RTC denied PRA’s request for writ of preliminary injunction as moot and academic because the auction had been consummated.
- August 3, 2009: PRA filed Motion for Leave to File and Admit Attached Supplemental Petition seeking to declare void the assessment, levy, auction sale of April 7, 2003, and the Certificates of Sale.
- January 8, 2010: RTC rendered decision dismissing PRA’s petition, finding PRA not exempt from payment of real property taxes and denying the supplemental petition.
- July 18, 2012: Supreme Court granted PRA’s petition, reversed and set aside the RTC order, declared PRA’s reclaimed properties exempt from real estate taxes, and voided the assessments, auction sale, and Certificates of Sale.
Facts — Subject Properties and Titles
- PRA reclaimed several portions of foreshore and offshore areas of Manila Bay, including areas located in ParaAaque City.
- PRA was issued Original Certificates of Title (OCT Nos. 180, 202, 206, 207, 289, 557, and 559) and Transfer Certificates of Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the reclaimed lands.
- The City of ParaAaque assessed alleged delinquencies for tax years 2001 and 2002 and, after levy and auction, obtained Certificates of Sale issued by the ParaAaque City Treasurer in favor of the City.
Lower Court (RTC) Ruling Summarized
- RTC found PRA to be a GOCC under Section 3 of P.D. No. 1084 and a stock corporation because it had an authorized capital stock divided into no par value shares.
- RTC noted PRA’s admission of corporate personality and that the properties were registered in its name.
- RTC concluded that as a GOCC, PRA’s local tax exemption was withdrawn by Section 193 of R.A. No. 7160 (Local Government Code) effective at the relevant time (2001–2002).
- RTC further ruled that any tax exemption claimed under E.O. No. 654 had been expressly repealed by R.A. No. 7160 and found PRA non-compliant with procedural requirements of Section 206 of the LGC.
- RTC denied PRA’s petition and refused the supplemental petition; petitioner’s motion for leave to file supplemental petition was denied.
Issues Presented to the Supreme Court
- Whether PRA is a government-owned or controlled corporation (GOCC) and therefore not exempt from real property taxes under the Local Government Code.
- Whether reclaimed lands held by PRA are part of the public domain and thus exempt from real property taxation.
- Whether the assessment, levy, auction sale (April 7, 2003) and Certificates of Sale issued by ParaAaque City are valid, given PRA’s claimed exemption.
PRA’s Contentions (Petitioner)
- PRA contends it is an incorporated instrumentality of the national government, not a GOCC under Section 2(13) of the Administrative Code nor a GOCC under Section 16, Article XII of the 1987 Constitution.
- PRA invokes Section 2(10) of the Administrative Code defining an instrumentality to argue it is vested with corporate powers yet remains an instrumentality, not a corporation.
- PRA argues that although it has capital stock divided into shares, it is not authorized to distribute dividends, surplus, or profits to stockholders and therefore fails the test to be a stock corporation.
- PRA asserts it cannot be a non-stock corporation because it has no members and was not organized for purposes enumerated in Section 88 of the Corporation Code (charitable, religious, educational, etc.).
- PRA insists it was not created to compete commercially in the marketplace and was established to perform public service—coordinated reclamation, administration and operation of government lands.
- PRA claims reclaimed lands remain part of the public domain and owned by the State; as such they are exempt from real property tax under Section 234(a) of the LGC unless beneficial use has been granted to a taxable person.
- PRA argues there is no proof that beneficial use of subject reclaimed lands was granted to a taxable person or that the lands were leased to a private taxable entity.
City of ParaAaque’s Contentions (Respondent)
- Respondent argues PRA consistently represented itself as a GOCC since its creation; P.D. No. 1084 declared it a GOCC and PRA has represented itself as such in numerous contracts.
- Respondent notes PRA admitted being a GOCC in pleadings filed before the RTC.
- The City emphasizes PRA’s authorized capital stock of three million no par value shares, with two million shares subscribed and fully paid, characterizing PRA as a stock corporation.
- Respondent relies on Section 193 of R.A. No. 7160 withdrawing tax exemptions enjoyed by GOCCs as the basis to sustain local taxation of PRA.
Applicable Statutes and Legal Definitions Cited
- Presidential Decree No. 1084 (Creating the Public Estates Authority, later transformed into PRA by E.O. No. 380), including:
- Section 2 (Declaration of Policy) — policy to coordinate, economize and efficiently reclaim lands and administer government lands.
- Section 4 (Purposes) — to reclaim land, develop, improve, administer, subdivide, dispose, lease and sell lands; provide necessary services for utilization.
- Section 7 (Capital Stock) — authorized capital stock divided into THREE MILLION no par value shares; subscription and payment terms.
- Executive Orders:
- E.O. No. 525 (Feb. 14, 1979) designating PEA as primary agency for reclamation projects.
- E.O. No. 380 (Oct. 26, 2004) transforming PEA into PRA.
- E.O. No. 654 and E.O. No. 798 referenced regarding PRA’s functions and transfers.
- Administrative Code of 1987:
- Section 2(13): Definition of GOCC — “any agency organized as a stock or non-stock corporation...”
- Section 2(10) [or (aa) in source]: Definition of Instrumentality — “any agency of the National Government... endowed with some if not all corporate powers...