CASE DIGEST : Manila International Airport Authority (MIAA) v. Court of Appeals, City of Parañaque, et al. G.R. No. 155650 July 20, 2006

FACTS

The Manila International Airport Authority (MIAA), created under Executive Order No. 903 (MIAA Charter), operates and administers the Ninoy Aquino International Airport (NAIA), including approximately 600 hectares of airport lands, runways, and buildings. The MIAA Charter provides that these properties are devoted to public use and cannot be sold or otherwise disposed of without presidential approval. In 1997, the Office of the Government Corporate Counsel opined that the Local Government Code of 1991 (Republic Act No. 7160) had withdrawn MIAA's exemption from real property tax. Acting on this opinion, the City of Parañaque assessed real property taxes against MIAA's airport lands and buildings, issued notices of delinquency, warrants of levy, and eventually auctioned several airport properties to satisfy the alleged tax deficiencies.

MIAA challenged the tax assessments before the Supreme Court, arguing that it is not a government-owned or controlled corporation (GOCC) but an instrumentality of the National Government. It maintained that the airport lands and buildings are owned by the Republic of the Philippines, constitute property of public dominion under the Civil Code, and are therefore exempt from local real property taxation under Section 234(a) of the Local Government Code, which exempts real property owned by the Republic unless beneficial use is granted to a taxable person. Parañaque, on the other hand, argued that MIAA possessed a separate juridical personality with corporate powers and should therefore be treated as a taxable GOCC.

ISSUE

Whether the airport lands and buildings administered by MIAA are subject to real property tax under the Local Government Code of 1991, despite MIAA's corporate powers.

Whether MIAA is a government-owned or controlled corporation subject to local taxation or merely a government instrumentality, and whether the properties it administers remain properties of the Republic devoted to public use, thereby exempt from local real property taxes pursuant to Section 234(a) of the Local Government Code and the Civil Code provisions on property of public dominion.

HELD

The Supreme Court granted the petition and declared that the City of Parañaque had no authority to impose real property taxes on MIAA's airport lands and buildings. The Court held that MIAA is not a GOCC because, under the Administrative Code of 1987, a GOCC must be organized as a stock or non-stock corporation. MIAA has neither capital stock nor members and, although vested with corporate powers, remains a government instrumentality performing governmental functions. Consequently, it forms part of the National Government and enjoys the latter's immunity from local taxation unless expressly subjected thereto by law.

The Court further ruled that the airport lands and buildings are owned by the Republic of the Philippines and are properties of public dominion under the Civil Code because they are intended for public use and public service. As such, they are exempt from real property tax under Section 234(a) of the Local Government Code, which exempts real property owned by the Republic except when the beneficial use is granted to a taxable private entity. Since no such beneficial use was granted, the tax assessments, levies, and auction sale conducted by the City of Parañaque were void. The case established the doctrine that government instrumentalities vested with corporate powers are distinct from GOCCs, and that public properties owned by the Republic remain exempt from local real property taxation.