12. Manila International Airport Authority vs City of Paranaque (G.R. No.

15560 July 20,

2006)
Facts:
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA). The MIAA Charter transferred to MIAA approximately 600
hectares of land, including the runways and buildings then under the Bureau of Air
Transportation. The MIAA Charter further provides that no portion of the land transferred to
MIAA shall be disposed of through sale or any other mode unless specifically approved by the
President of the Philippines.
On March 1997, the Office of the Government Corporate Counsel issued an Opinion that states
that  the Local Government Code of 1991 withdrew the exemption from real estate tax granted to
MIAA. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate tax
imposed by the City. MIAA then paid some of the real estate tax already due.
On June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of
Parañaque for the taxable years 1992 to 2001. The City of Parañaque, through its City Treasurer,
issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the
City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should
MIAA fail to pay the real estate tax delinquency.
The MIAA sought clarification of the earlier Opinion of the OGCC. The OGCC then pointed out
that Section 206 of the Local Government Code requires persons exempt from real estate tax to
show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof
that MIAA is exempt from real estate tax.
MIAA filed with the Court of Appeals a petition to restrain the City of Parañaque from imposing
real estate tax on, levying against, and auctioning for public sale the Airport Lands and
Buildings. The CA dismissed the petition because it was filed beyond the 60-day reglementary
period.
Meanwhile, the City of Parañaque posted notices of auction sale to different places and have the
same published to a newspaper of general circulation. The notices announced the public auction
sale of the Airport Lands and Buildings to the highest bidder on February 7, 2003.
A day before the public auction, MIAA filed with the SC a TRO and it was issued by the Court
effective immediately. However, respondents received the TRO only three hours after the
conclusion of the public auction.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in
the name of MIAA. However, MIAA points out that it cannot claim ownership over these
properties since the real owner of the Airport Lands and Buildings is the Republic of the
Philippines. The Airport Lands and Buildings are thus inalienable and are not subject to real
estate tax by local governments. MIAA invokes the principle that the government cannot tax
itself. It also pointed out that its Charter specifically exempts it from the payment of real estate
tax.
Respondents invoke Section 193 of the LGC which expressly withdrew the tax exemption
privileges of "government-owned and-controlled corporations" upon the effectivity of the
Local Government Code. Respondents further argue that since MIAA has already paid some of
the real estate tax assessments, it is now estopped from claiming that the Airport Lands and
Buildings are exempt from real estate tax.
Issue: Whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under
existing laws
Ruling:
Yes. MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local
governments. First, MIAA is not a government-owned or controlled corporation but
an instrumentality of the National Government and thus exempt from local taxation. Second,
the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from
real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
A government-owned or controlled corporation must be "organized as a stock or non-stock
corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock
corporation because it has no capital stock divided into shares. MIAA has no stockholders or
voting shares. MIAA has capital but it is not divided into shares of stock.
MIAA is also not a non-stock corporation because it has no members. Even if we assume that the
Government is considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to their members.
Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating
income to the National Treasury.
(Section of the MIAA Charter provides that the Capital of MIAA to be contributed by the
National Government shall be increased from P2,500,000,000.00 to P10,000,000,000.00 kaya
parang mukhang stockholder nya si National Government pero hindi as explained above)
MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference
is that MIAA is vested with corporate powers. When the law vests in a government
instrumentality corporate powers, the instrumentality does not become a corporation. Unless the
government instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate powers. 
Section 133 of the Local Government Code also states that "unless otherwise provided" in the
Code, local governments cannot tax national government instrumentalities. 
2. Airport Lands and Buildings of MIAA are Owned by the Republic
The Airport Lands and Buildings of MIAA are property of public dominion and therefore
owned by the State or the Republic of the Philippines. 
Article 420 of the Civil Code defines property of public dominion as one "intended for public
use." 
The Airport Lands and Buildings are devoted to public use because they are used by the public
for international and domestic travel and transportation. The terminal fees MIAA charges to
passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the
income that maintains the operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed user's tax. This means
taxing those among the public who actually use a public facility instead of taxing all the public
including those who never use the particular public facility. A user's tax is more equitable — a
principle of taxation mandated in the 1987 Constitution.
As properties of public dominion, the Airport Lands and Buildings are outside the
commerce of man. Hence, cannot be the subject of an auction sale.
Any encumbrance, levy on execution or auction sale of any property of public dominion is void
for being contrary to public policy. Essential public services will stop if properties of public
dominion are subject to encumbrances, foreclosures and auction sale.
Unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from
public use, they are properties of public dominion, owned by the Republic and outside the
commerce of man.
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Its
status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive
head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the
Republic can sign such deed of conveyance.
Moreover, the MIAA Charter transferred the Airport Lands and Buildings to MIAA without the
Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation.
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA
was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The
purpose was merely to reorganize a division in the Bureau of Air Transportation into a
separate and autonomous body. The Republic remains the beneficial owner of the Airport
Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any
ownership rights over MIAA's assets adverse to the Republic.
Real Property Owned by the Republic is Not Taxable
The Republic may grant the beneficial use of its real property to an agency or instrumentality of
the national government. This happens when title of the real property is transferred to an agency
or instrumentality even as the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are
not exempt from real estate tax. 

Others:
The minority posits that the "determinative test" whether MIAA is exempt from local taxation is
its status — whether MIAA is a juridical person or not.  According to them, MIAA is
indisputably a juridical person. The minority argues that since the Local Government Code
withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate
tax.
No. This theory will result in gross absurdities. It will make the national government, which
itself is a juridical person, subject to tax by local governments since the national government is
not included in the enumeration of exempt entities in Section 193. Under this theory, local
governments can impose any kind of local tax, and not only real estate tax, on the national
government.
The minority's theory violates Section 133(o) of the Local Government Code which expressly
prohibits local governments from imposing any kind of tax on national government
instrumentalities.

 Congress has no power to create government-owned or controlled corporations with

special charters unless they are made to comply with the two conditions of common good
and economic viability. The test of economic viability applies only to government-owned
or controlled corporations that perform economic or commercial activities and need to
compete in the market place.
The MIAA need not meet the test of economic viability because the legislature did not create
MIAA to compete in the market place. MIAA does not compete in the market place because
there is no competing international airport operated by the private sector. 
The terminal fees that MIAA charges every passenger are regulatory or administrative fees and
not income from commercial transactions.