CASE DIGEST : Light Rail Transit Authority (LRTA) v. Quezon City G.R. No. 221626 October 9, 2019

 

FACTS

The Light Rail Transit Authority (LRTA), created under Executive Order No. 603, was tasked to construct, operate, and maintain the country's light rail transit system. In 2007, the City of Quezon City issued statements of delinquency, warrants of levy, and notices of tax delinquency against LRTA for unpaid real property taxes (RPT) on its lands, railways, carriageways, stations, and other facilities. Quezon City later auctioned the properties, and in the absence of other bidders, the properties were forfeited to the city pursuant to Section 263 of the Local Government Code (Republic Act No. 7160). LRTA challenged the assessments, arguing that it is a government instrumentality exempt from local taxation under Section 133(o) and Section 234(a) of the Local Government Code, as interpreted in MIAA v. Court of Appeals.

The Regional Trial Court upheld the tax assessments, relying on the earlier case of LRTA v. Central Board of Assessment Appeals, which had classified LRTA properties as taxable patrimonial properties. On appeal, LRTA argued that subsequent jurisprudence, particularly MIAA v. Court of Appeals, GSIS v. City Treasurer of Manila, and City of Lapu-Lapu v. PEZA, had clarified that government instrumentalities performing essential public functions are exempt from local real property taxes. It maintained that its railways, stations, and related facilities are properties of public dominion devoted to public use, owned by the Republic, and therefore beyond the taxing power of local government units.

ISSUE

Whether the Light Rail Transit Authority is a government-owned or controlled corporation (GOCC) subject to local real property tax, or a government instrumentality exempt from taxation under Sections 133(o) and 234(a) of the Local Government Code.

Whether the LRTA's railways, carriageways, stations, and other properties are properties of public dominion under the Civil Code, thereby exempt from real property tax, and whether Quezon City's tax assessments, levy, and auction sale of these properties were valid.

HELD

The Supreme Court granted the petition and ruled that the LRTA is a government instrumentality, not a GOCC. Although its charter grants it corporate powers, it does not possess capital stock divided into shares or members, which are essential characteristics of stock and non-stock corporations under the Administrative Code of 1987 and the Corporation Code. Consequently, LRTA forms part of the National Government and is covered by the limitation under Section 133(o) of the Local Government Code, which prohibits local government units from imposing taxes, fees, or charges on the National Government, its agencies, and instrumentalities unless expressly authorized by law. The Court likewise held that Section 234(a) of the Local Government Code exempts from real property tax properties owned by the Republic, except where their beneficial use has been granted to a taxable private entity.

The Court further held that LRTA's railroads, carriageways, terminal stations, and the lands on which they stand are properties of public dominion under the Civil Code because they are devoted to public use and public service as part of the country's mass transportation system. Such properties are outside the commerce of man and cannot be levied upon or sold at public auction. Accordingly, the real property tax assessments, warrants of levy, auction sales, and certificates of sale issued by Quezon City were declared void. However, the Court clarified that private entities enjoying the beneficial use of LRTA properties for private purposes may still be assessed and taxed, but the exemption remains with LRTA and its public-use properties. The ruling effectively abandoned the earlier doctrine in LRTA v. Central Board of Assessment Appeals in light of the Court's later jurisprudence recognizing the tax immunity of government instrumentalities