MIAA vs COA

GR 155650, July 20, 2006

Facts:
MIAA operates NAIA in Paranaque under EO 903 by President Marcos. EO 909 and 298
amended the said charter
MIAA administers land, improvements, and equipments within NAIA. MIAA Charter
transferred 600 hectares of land and building to MIAA.
The Charter states that no portion of the land transferred to the MIAA shall be disposed of
unless specifically approved by The President of the Philippines
The OGCC issued Opinion No.061 which withdrew the exemption from real estate tax
granted to MIAA under section 21 of MIAA Charter.
MIAA Negotiated with Paranaque City then paid some of the real estate tax due already
The City then issued notices of levy and warrants of levy on the Airport Lands and Buildings.
The OGCC issued Opinion no. 147 clarifying Opinion No.061. It pointed out that the Local
Government Code requires persons exempt from real estate tax to show proof of exemption.
The OGCC opined that MIAA Charter is the proof that MIAA is exempt from real estate tax.
MIAA filed with CA a petition for prohibition and injunction, praying for preliminary injunction
or TRO. However, the CA dismissed the petition because MIAA filed the petition beyond the
60- day reglementary period.
MIAA also filed a motion for reconsideration and supplemental motion for reconsideration
which was also denied by the CA
MIAA filed a petition for review on certiorari to the Supreme Court.
The City however, posted notices of auction sale and published notices in the Philippine
Daily Inquirer, a newspaper of general circulation in the PH.
MIAA filed an urgent Ex-Parte and Reiteratory Motion for the Issuance of the TRO.
The Court issued the TRO, however the respondents received the notice only 3 hours after
the conclusion of the public auction
Issue:
Whether or not the land and buildings are exempt from real estate tax under existing laws.
If exempt, whether or not the assessments issues, proceedings taken pursuant to such
assessments are void.
Decision: The Petition is granted. The land and buildings are exempt. All real tax
assessments except for portions that MIAA has lease to private parties void. The auction
sale and all of its effects are also void.

Rationale:
1. Is Land and Buildings of MIAA exempt? YES, However, portions of the properties leased to
private parties are not exempt. The Court followed its ruling in Lung Center vs QC. that
land leased to private individuals are not exempt from such taxes.
a. MIAA is not a GOCC but an instrumentality of the National Government. The general rule is
tax is construed against the state, but exemption is construed against the taxpayer.
However, when the exemption is to the national government instrumentality from local
taxation, such exemption is construed in favor of the national government instrumentality.
Under the Local Government Code, Unless otherwise provided in the code, local cannot tax
national government instrumentalities. Under Article XII section 16 of the Constitution, there
are 2 tests for GOCCs created through special charter. First is it must be established for the
common good and second, is that it must meet the test of economic viability. Government

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Instrumentalities need not pass the economic viability test as the government may even
subsidize the entire operation. The non economic viability does not excuse the government
to not render essential public service.
Legislature did not create MIAA to compete in market. There is no competition because
there is no International airport operated by private sector. The operation of the airport
requires presence of personnel from government agencies who perform government
functions essential to the operation of the airport.
The reason that the general rule does not apply in case the case of national government
instrumentality is that in such case the practical effect of an exemption is merely to reduce
the amount of money that has to be handled by government in the course of its operations.
There is no point for the governments to tax each other, unless a sound and compelling
policy requires such transfer of funds
MIAA is a government instrumentality. The Administrative Code Provides that
instrumentality refers to any agency of national government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter.
When the law vests in a government instrumentality corporate powers, it does not make it a
corporation.
When the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National government machinery although not integrated
with the department framework. THE MIAA charter states that transforming the MIAA into a
separate and autonomous body will make its operation more financially viable.
MIAA is not organized as a stock corporation. Corporation Code define stock corporation as
one whose capital stock is divided into shares and authorized to distribute to the holders of
such share dividends. No Capital stocks divided into shares. No stockholders or voting
shares.
MIAA is not organized as a nonstock corporation. The Corporation Code define this as one
where no part of its income is distributable as dividends to its members, trustees or officers.
The Corporation Code also provides that nonstock corporations are organized for
charitable, religious, educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like
chambers.
Since the Charter mandates MIAA to remit 20% of its annual gross income to the National
Treasury, this prevents MIAA from being a nonstock corporation.
MIA is not organized for any of the purpose stated above. It is a public utility to operate an
international and domestic airport for public use
The Real Properties are owned by the Republic of the Philippines.Under the civil code The
RP owns the Property if it is of public dominion. The civil code provides that property of
public dominion are those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and other of similar
character. It also include those which belong to the state, without being for public use are
intended or some public service or for the development of the national wealth. The Court has
previously ruled that properties of public dominion are outside the commerce of man.
The MIAA Airport constitutes a PORT
The Land and building are devoted to public use because they are used by the public or
travel and transportation. The collection of fee does not remove character of public use.
There is a cost to maintain these facilities which the public must pay but only those who
actually use it, instead of the whole public to pay taxes. These fees are termed users tax.

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The Land and building are properties of public dominion because they are intended for
public use
Since properties of dominion are outside the commerce of man, it cannot be the subject of
an auction sale. Essential public services if properties of public dominion are subject to
encumbrances, foreclosures, and auction sale. Unless the President withdraw the lands and
building from public use, they are properties of public dominion
MIAA is merely holding title in trust for the republic. The administration code allows
instrumentalities to hold title to real properties owned by RP. It even authorizes some official
to sign deed of conveyance. With MIAA, it is clearer since not even its head can sign, but
only the President of the Republic.
The transfer of the Land and Buildings was not meant to transfer beneficial ownership. The
purpose was to reorganize a division in the Bureau of Air transportation into a separate and
autonomous body. MIAA is owned by the republic