Republic v. Parañaque City
REITERATIONFacts
The Antecedents: The Philippine Reclamation Authority (PRA), formerly the Public Estates Authority (PEA), was created to undertake reclamation projects. PRA reclaimed portions of Manila Bay, including areas in Parañaque City, and obtained Certificates of Title for these lands. In 2003, the Parañaque City Treasurer issued Warrants of Levy on PRA's reclaimed properties for delinquent real property taxes for 2001 and 2002. PRA filed a petition for prohibition with prayer for TRO and/or preliminary injunction, which was denied by the Regional Trial Court (RTC). The auction sale of the properties proceeded. Later, PRA filed a supplemental petition seeking to nullify the tax assessment, levy, auction sale, and certificates of sale. Procedural History: The RTC dismissed PRA's petition, ruling that PRA is a Government-Owned or Controlled Corporation (GOCC) and thus not exempt from real property taxes under Section 193 of Republic Act No. 7160 (Local Government Code). The RTC also found that the tax exemption claimed under E.O. No. 654 was repealed by R.A. No. 7160 and that PRA failed to comply with procedural requirements. The Petition: PRA filed a petition for review on certiorari, assailing the RTC's decision, arguing that it is an incorporated instrumentality of the National Government, exempt from real property tax under Sections 234(a) and 133(o) of the Local Government Code, and that reclaimed lands are part of the public domain and thus exempt from real property tax.
Issue(s)
Whether the Philippine Reclamation Authority (PRA) is a Government-Owned or Controlled Corporation (GOCC) or a government instrumentality. Whether reclaimed lands owned by the PRA are exempt from real property tax. Whether the assessment, levy, and auction sale of the subject reclaimed properties by the City of Parañaque are valid.
Ruling
The petition is GRANTED. The January 8, 2010 Order of the Regional Trial Court, Branch 195, Parañaque City, is REVERSED and SET ASIDE. All reclaimed properties owned by the Philippine Reclamation Authority are hereby declared EXEMPT from real estate taxes. All real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Parañaque on the subject reclaimed properties; the assailed auction sale, dated April 7, 2003; and the Certificates of Sale subsequently issued by the Parañaque City Treasurer in favor of the City of Parañaque, are all declared VOID.
Ratio Decidendi
On whether the Philippine Reclamation Authority (PRA) is a Government-Owned or Controlled Corporation (GOCC) or a government instrumentality: The Court ruled that PRA is not a GOCC. A GOCC must be organized as a stock or non-stock corporation. PRA, while having a capital stock, is not authorized to distribute dividends, thus it is not a stock corporation. It also lacks members and is not organized for purposes specified in Section 88 of the Corporation Code, disqualifying it as a non-stock corporation. Furthermore, GOCCs created by special charters must meet the test of economic viability, a condition PRA does not meet as it was created for public service, not commercial competition. Therefore, PRA is classified as a government instrumentality vested with corporate powers, performing an essential public service, as defined under Section 2(10) of the Introductory Provisions of the Administrative Code. The Court cited Manila International Airport Authority v. Court of Appeals in distinguishing between GOCCs and government instrumentalities, emphasizing that the latter, even if vested with corporate powers, remain part of the National Government machinery and do not necessarily become corporations unless organized as such. The Court also noted that Section 16, Article XII of the Constitution requires GOCCs to meet the test of economic viability, which PRA, being a public service entity, does not need to satisfy. On whether reclaimed lands owned by the PRA are exempt from real property tax: The Court held that reclaimed lands are part of the public domain and are owned by the State, thus exempt from real property tax. Section 234(a) of the Local Government Code exempts real property owned by the Republic of the Philippines from real property tax, unless its beneficial use is granted to a taxable person. The Court found no proof that PRA granted the beneficial use of the subject reclaimed lands to a taxable entity. Furthermore, Section 133(o) of the Local Government Code prohibits local governments from imposing taxes on the National Government, its agencies, and instrumentalities. The Court reiterated that reclaimed lands, such as foreshore and submerged areas, remain public lands and part of the public domain, retaining their potential for public use or service. Citing Chavez v. Public Estates Authority and AMARI Coastal Development Corporation, the Court stated that these lands are inalienable unless reclaimed, classified as alienable, and declared no longer needed for public service, requiring a law or presidential proclamation for such classification. Properties of public dominion are not subject to execution or foreclosure sale. On whether the assessment, levy, and auction sale of the subject reclaimed properties by the City of Parañaque are valid: Based on the preceding rulings, the Court declared the assessment, levy, and auction sale of the subject reclaimed lands by the City of Parañaque as void. Since PRA is an exempt government instrumentality and its properties are part of the public domain, they cannot be subjected to real property tax by local government units. The Court emphasized the principle of supremacy of the National Government over local governments, stating that local governments cannot tax national government instrumentalities. The assessment, levy, and subsequent auction sale were found to be without legal basis, as they infringed upon the tax exemption privileges of the national government's instrumentality and the nature of public domain lands. The Court's decision in Manila International Airport Authority v. Court of Appeals was invoked to support the strict construction of tax exemptions in favor of national government instrumentalities.
Main Doctrine
The Philippine Reclamation Authority (PRA) is an incorporated government instrumentality, not a Government-Owned or Controlled Corporation (GOCC), and therefore, its reclaimed properties are exempt from real property tax as they remain part of the public domain owned by the State.