Metropolitan Waterworks v. Quezon City
REITERATIONFacts
The Antecedents: The Metropolitan Waterworks and Sewerage System (MWSS) received Final Notices of Real Property Tax Delinquency from the Local Government of Quezon City (QC) for properties it owned in QC, totaling P237,108,043.83. QC issued Warrants of Levy and published a Notice of Sale for delinquent real properties, including those owned by MWSS. Procedural History: MWSS filed a Petition for Certiorari and Prohibition with the Court of Appeals (CA), arguing its properties were exclusively devoted to public use and thus exempt from real property tax. The CA issued a Temporary Restraining Order (TRO) and later a Writ of Preliminary Injunction. However, the CA denied MWSS's petition for lack of merit and lifted the injunction, holding that MWSS, not being a municipal corporation and exercising proprietary functions due to privatization, could not invoke immunity from real property taxation. The Petition: After QC issued new Warrants of Levy, MWSS filed a Petition for Certiorari with the Supreme Court, seeking to nullify the CA decision and prevent the auction of its properties. The Supreme Court issued TROs to prevent the auction.
Issue(s)
Whether MWSS violated the principle of hierarchy of courts by directly filing its petition before the Court of Appeals. Whether the Local Government of Quezon City may assess real property taxes on MWSS's properties. Whether MWSS is a government instrumentality exercising corporate powers or a government-owned and controlled corporation for purposes of real property tax exemption.
Ruling
The Supreme Court granted the Petition, reversed the Court of Appeals' Decision, and made the TROs permanent. The real properties of MWSS in Quezon City were declared exempt from real estate tax, and all assessments and notices of delinquency issued by QC were declared void, except for portions proven to have been leased to private parties.
Ratio Decidendi
On the Principle of Hierarchy of Courts: The Court acknowledged that MWSS's direct resort to the Court of Appeals, bypassing the Regional Trial Court which shares concurrent jurisdiction for certiorari petitions, could be seen as a violation of the hierarchy of courts. However, the Court noted that the CA itself exercised its discretion to give due course to the petition, finding that the issue presented was a pure question of law. The Court stated that while the doctrine is typically invoked for direct resorts to the Supreme Court, the CA has full discretion in such matters, and no error could be ascribed to it for passing upon the issue. On the Taxability of MWSS Properties: The Court held that local government units are granted the power to levy real property tax under Section 232 of the Local Government Code (LGC), but this power is subject to limitations. Section 133(o) of the LGC provides a general rule that local government units cannot levy taxes on the national government, its agencies, and instrumentalities, unless otherwise provided. Section 234 of the LGC enumerates exemptions from real property tax, including real property owned by the Republic or its political subdivisions, except when the beneficial use is granted to a taxable person. The Court emphasized that the LGC also withdraws previously granted tax exemptions for government-owned or controlled corporations (GOCCs), but this withdrawal does not apply to government instrumentalities. On MWSS's Classification: The Court, guided by the parameters set in Manila International Airport Authority v. Court of Appeals, determined that MWSS is a government instrumentality exercising corporate powers, not a GOCC. Although MWSS was converted into a stock corporation by Presidential Decree No. 425, its charter and subsequent laws, including Executive Order No. 596 and Republic Act No. 10149, categorize it as a government instrumentality with corporate powers. The Court noted that properties of public dominion, which are devoted to public use and outside the commerce of man, are not subject to levy. While MWSS has the power to dispose of its real property under Section 3(j) of its charter, this does not automatically classify it as a GOCC. The Court reiterated that government instrumentalities, like MWSS, are exempt from real property taxes under Section 133(o) of the LGC, and this exemption was not withdrawn by Section 234 of the LGC, which specifically targets GOCCs. Therefore, MWSS's properties are exempt unless their beneficial use has been extended to a taxable person, a fact not alleged by the respondents.
Main Doctrine
A government instrumentality exercising corporate powers is not liable for the payment of real property taxes on its properties unless it is alleged and proven that the beneficial use of its properties has been extended to a taxable person. The Local Government Code, specifically Section 133(o) and Section 234, exempts government instrumentalities from real property taxes, a privilege not withdrawn by the Code, unlike that of government-owned and controlled corporations.