Case Summary (G.R. No. 191109)
Petitioner
Republic of the Philippines, represented by the Philippine Reclamation Authority (PRA).
Respondent
City of Parañaque, acting through its City Treasurer.
Key Dates
• February 4, 1977: PD 1084 creates the Public Estates Authority (PEA).
• February 14, 1979: EO 525 designates PEA as lead reclamation agency.
• October 26, 2004: EO 380 transforms PEA into PRA.
• February 19, 2003: Warrants of levy issued on PRA-reclaimed properties.
• April 7, 2003: Public auction of subject properties.
• January 8, 2010: RTC Branch 195 denies PRA’s petition, ruling PRA a taxable GOCC.
• July 18, 2012: Supreme Court issues decision under the 1987 Constitution.
Applicable Law
• 1987 Constitution, Article XII, Section 16 (GOCC creation subject to common good and economic viability) and Section 2 (public domain).
• Administrative Code of 1987, Introductory Provisions, Sections 2(10) (instrumentality) and 2(13) (GOCC).
• Corporation Code, Sections 3, 87, 88 (definitions of stock and non-stock corporations).
• Local Government Code (RA 7160), Sections 133(o) (limits on local taxing power) and 234(a) (real property tax exemptions).
Procedural Background
PRA sought prohibition, a TRO, and a writ of preliminary injunction to stop the auction of its reclaimed lands, all denied by the RTC. PRA’s supplemental petition to void the tax assessment, levy, sale and certificates of sale was likewise rejected. PRA then filed a Rule 45 petition for certiorari before the Supreme Court.
Issues
- Whether PRA is a government-owned or controlled corporation (GOCC) subject to local real property taxation.
- Whether reclaimed lands remain part of the public domain and thus exempt from real property tax.
Supreme Court Ruling
The petition is granted. The RTC’s January 8, 2010 order is reversed and set aside. All reclaimed properties of PRA are declared exempt from real property tax. Prior assessments, levies, auction sale, and certificates of sale are void.
Rationale: GOCC vs. Government Instrumentality
Under the Administrative Code, a GOCC must be organized as a stock or non-stock corporation (Sec. 2(13)). A stock corporation requires capital stock divided into shares and authorization to distribute dividends (Corp. Code Sec. 3); a non-stock corporation must have members and serve specified purposes (Corp. Code Secs. 87–88). Although PRA has capital stock, its charter does not authorize dividends or surplus distribution and it admits no members. It was established by executive issuances to perform an essential public service, not to compete commercially. The 1987 Constitution (Art. XII, Sec. 16) subjects GOCCs created by special charter to the economic viability test—a requirement inapplicable to instrumentalities performing public functions. PRA thus qualifies as an incorporated government instrumentality (Admin Code Sec. 2(10)), not a GOCC.
Exemption from Real Property Tax
Local Government Code Section 234(a) exempts real property owned by the Republic or its political subdivisions unless beneficial use is granted to a taxable person. Section 133(o) bars local governments from taxing the national government, its agencies, or instrumentalities. Title in PRA’s name under the Administrative Code does not transfer ownership away from the Republic; PRA holds beneficial use on behalf of the State. No evidence shows PRA granted beneficial use of its reclaimed lands to any private taxable entity.
Public Domain Nature
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Procedural History
- Petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure filed by the Philippine Reclamation Authority (PRA).
- Assailed Order of January 8, 2010 of the Regional Trial Court (RTC), Branch 195, Parañaque City, which held PRA to be a government-owned or controlled corporation (GOCC) and thus not exempt from real property taxes.
- RTC denied PRA’s petition for prohibition, temporary restraining order (TRO), and writ of preliminary injunction; sanctioned the auction sale of reclaimed lands on April 7, 2003.
- PRA’s Motion for Leave to File and Admit Supplemental Petition (seeking nullification of tax assessment, levy, auction sale, and certificates of sale) was denied by the RTC.
- Petitioners elevated the case to the Supreme Court by certiorari, raising pure questions of law.
Facts
- Public Estates Authority (PEA) created by P.D. No. 1084 (Feb. 4, 1977) to coordinate reclamation of lands and administer government-owned lands.
- PEA designated lead agency for reclamation projects under E.O. No. 525 (Feb. 14, 1979).
- PEA transformed into Philippine Reclamation Authority (PRA) under E.O. No. 380 (Oct. 26, 2004), inheriting all reclamation powers and functions.
- PRA reclaimed foreshore and offshore areas of Manila Bay in Parañaque City; issued Original Certificates of Title (OCT) Nos. 180, 202, 206, 207, 289, 557, 559 and Transfer Certificates of Title (TCT) Nos. 104628, 7312, 7309, 7311, 9685, 9686.
- City Treasurer Carabeo issued warrants of levy on reclaimed lands (Central Business Park, Barangay San Dionisio) for delinquent taxes (2001–2002) assessed by City Assessor Cue.
- PRA filed prohibition and injunctive relief with RTC; TRO denied on April 3, 2003; request to defer auction refused; preliminary injunction denied as moot after auction sale consummation on April 7, 2003.
- After failed compromise, PRA sought to file a supplemental petition (Aug. 3, 2009) to void assessment, levy, auction sale, and certificates of sale; motion denied.
- RTC’s January 8, 2010 decision dismissed PRA’s petition; held PRA a taxable GOCC under Section 3 of P.D. No. 1084 and Section 193 of R.A. 7160 (Local Government Code), and that PRA’s claimed exemption under E.O. No. 654 was repealed and procedurally defective.
Issues Presented
- Whether PRA is a GOCC and thus liable for real property tax.
- Whether reclaimed lands remain part of the public domain and are exempt from real property tax.
- Interpretation of exemptions under Sections 234(a) and 133(o) of R.A. 7160.
- Application of definitions in the Administrative Code and Corporation Code regarding GOCCs and instrumentalities.
- Constitutional requirements for creation of GOCCs under Section 16, Article XII of the 1987 Constitution.
Petitioner’s (PRA) Contentions
- PRA is an “incorpo