Mactan-Cebu International Airport Authority v. City of Lapu-Lapu
REITERATIONFacts
The Antecedents: The Mactan-Cebu International Airport Authority (MCIAA) was created by R.A. No. 6958 and initially enjoyed tax exemptions. However, this Court, in Mactan-Cebu International Airport Authority v. Marcos (1996), ruled that MCIAA was no longer exempt from real property taxes upon the effectivity of the Local Government Code (LGC) of 1991. Subsequently, the City of Lapu-Lapu assessed MCIAA for real property taxes. MCIAA paid substantial amounts but contested the assessment, particularly for properties used for public purposes like the airfield, runway, and taxiway. The Department of Justice (DOJ) issued Opinion No. 50, Series of 1998, stating these properties are owned by the Republic of the Philippines and held in trust by MCIAA. The Department of Finance (DOF) concurred, instructing the City Assessor to transfer these properties to the 'Exempt Roll'. Despite this, the City Treasurer issued notices of levy and proceeded to auction 27 of MCIAA's properties, which the City then forfeited and purchased. Procedural History: MCIAA filed a petition for prohibition with the RTC, seeking to enjoin the auction and declare its airport properties exempt from real property tax. The RTC initially issued a TRO, then a preliminary injunction, but later lifted it, finding that City Ordinance No. 44 authorized the collection of real property tax and that the SEF tax and penalty interest were also collectible, albeit with a recomputation of interest. MCIAA elevated the case to the Court of Appeals (CA) via a petition for certiorari. The CA declared the airport terminal building, airfield, runway, taxiway, and their lots NOT EXEMPT from real estate tax, and upheld the imposition and collection of the real estate tax, SEF, and penalty interest, but declared the auction sale and forfeiture NULL and VOID. MCIAA filed a motion for partial reconsideration, arguing it was a government instrumentality, not a GOCC, and thus exempt, citing Manila International Airport Authority v. Court of Appeals (2006 MIAA case). The CA denied the motion, maintaining its reliance on the 1996 MCIAA case. The Petition: MCIAA filed a petition for review on certiorari with the Supreme Court, arguing that it is a government instrumentality, not a GOCC, and therefore its properties used for public purposes are exempt from real estate taxes, citing the 2006 MIAA case. MCIAA also argued that the City could not impose taxes without appropriate ordinances and that the properties were exempt as they are of public dominion and essential to national security.
Issue(s)
Whether MCIAA is a government instrumentality exempt from real property taxes. Whether MCIAA's airport terminal building, airfield, runway, taxiway, and the lots on which they are situated are exempt from real property taxes. Whether the City of Lapu-Lapu can impose real property tax, Special Education Fund (SEF) tax, and penalty interest without appropriate ordinances. Whether the 1996 MCIAA case or the 2006 MIAA case is controlling.
Ruling
The petition is GRANTED. The Decision and Resolution of the Court of Appeals (Cebu City) are REVERSED and SET ASIDE. 1. Petitioner's properties actually, solely, and exclusively used for public purpose (airport terminal building, airfield, runway, taxiway, and the lots on which they are situated) are DECLARED EXEMPT from real property tax imposed by the City of Lapu-Lapu. 2. All real property tax assessments, including the additional tax for the special education fund and penalty interest, and final notices of delinquency issued by the City of Lapu-Lapu on petitioner's properties are DECLARED VOID, except for portions leased to private parties. 3. The sale in public auction of 27 of petitioner's properties and the subsequent forfeiture and purchase by the City of Lapu-Lapu, along with the Certificates of Sale of Delinquent Property, are DECLARED NULL and VOID.
Ratio Decidendi
On whether MCIAA is a government instrumentality and its properties are exempt from real property tax: The Supreme Court held that the Court of Appeals erred in relying on the 1996 MCIAA case and refusing to apply the 2006 MIAA case. The Court reiterated its ruling in the 2006 MIAA case, which held that MIAA is a government instrumentality, not a GOCC, and its airport lands and buildings are properties of public dominion owned by the Republic of the Philippines, thus exempt from real estate tax. The Court found MCIAA to be similarly situated as MIAA, being vested with corporate powers but not organized as a stock or non-stock corporation, and performing essential public services. Therefore, MCIAA, as a government instrumentality, is exempt from local taxation under Section 133(o) of the LGC. The properties in question (airport terminal building, airfield, runway, taxiway, and lots) are devoted to public use, making them properties of public dominion owned by the Republic and outside the commerce of man, hence inalienable and exempt from real property tax. The exception under Section 234(a) of the LGC, which taxes properties where beneficial use is granted to a taxable person, does not apply to MCIAA itself as it is not a taxable entity, though portions leased to private parties may be subject to tax. On whether MCIAA's airport terminal building, airfield, runway, taxiway, and the lots on which they are situated are exempt from real property taxes: The Supreme Court held that the Court of Appeals erred in relying on the 1996 MCIAA case and refusing to apply the 2006 MIAA case. The Court reiterated its ruling in the 2006 MIAA case, which held that MIAA is a government instrumentality, not a GOCC, and its airport lands and buildings are properties of public dominion owned by the Republic of the Philippines, thus exempt from real estate tax. The Court found MCIAA to be similarly situated as MIAA, being vested with corporate powers but not organized as a stock or non-stock corporation, and performing essential public services. Therefore, MCIAA, as a government instrumentality, is exempt from local taxation under Section 133(o) of the LGC. The properties in question (airport terminal building, airfield, runway, taxiway, and lots) are devoted to public use, making them properties of public dominion owned by the Republic and outside the commerce of man, hence inalienable and exempt from real property tax. The exception under Section 234(a) of the LGC, which taxes properties where beneficial use is granted to a taxable person, does not apply to MCIAA itself as it is not a taxable entity, though portions leased to private parties may be subject to tax. On whether the City of Lapu-Lapu can impose real property tax, SEF tax, and penalty interest without appropriate ordinances: The Court declared all real property tax assessments, including the additional tax for the SEF and penalty interest, as VOID. This ruling is predicated on the primary finding that MCIAA's properties used for public purposes are exempt from such taxes. The Court did not delve into the validity of the ordinances themselves, as the core issue of taxability of the properties was resolved in favor of MCIAA's exemption. The Court declared the auction sale, forfeiture, and purchase of MCIAA's properties by the City of Lapu-Lapu as NULL and VOID. This is a direct consequence of the finding that the properties are exempt from real property tax. Properties of public dominion, being inalienable, cannot be subjected to levy, execution, or auction sale. The Court reiterated that such actions are void for being contrary to public policy, as essential public services would be disrupted if such properties could be sold to satisfy tax delinquencies. On which case is controlling: The Supreme Court unequivocally held that the 2006 MIAA case governs and overturned the Court of Appeals' reliance on the 1996 MCIAA case. The Court emphasized that the 2006 MIAA case, decided by the Court en banc, effectively reversed the earlier ruling by a Division. The finality of the 2006 MIAA case was also noted. The Court found the reasoning in the 2006 MIAA case to be more current and applicable to MCIAA's situation, given the similarities in their charters and functions, and the subsequent jurisprudence that affirmed the classification of such entities as government instrumentalities.
Main Doctrine
Properties of government instrumentalities that are actually, solely, and exclusively used for public purposes, such as airport terminal buildings, airfields, runways, and taxiways, are exempt from real property tax. These properties are considered owned by the Republic of the Philippines and are of public dominion, thus falling outside the commerce of man and are inalienable.