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Tax Case Digest Mactan Cebu International Airport Authority vs Marcos et al GR No 120082
By PactaSuntServanda - July 08, 2014
Mactan Cebu International Airport Authority vs Marcos, et al.,
GR No 120082 September 11, 1996

Facts:
Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic
Act No. 6958, mandated to “principally undertake the economical, efficient and effective control,
management and supervision of the Mactan International Airport in the Province of Cebu and the
Lahug Airport in Cebu City, and such other airports as may be established in the Province of Cebu.
Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of
realty taxes in accordance with Section 14 of its Charter:

"Sec. 14. Tax Exemptions. -- The Authority shall be exempt from realty taxes imposed by the National
Government or any of its political subdivisions, agencies and instrumentalities."

On October 11, 1994, however, the Office of the Treasurer of the City of Cebu, demanded payment for
realty taxes on several parcels of land belonging to the petitioner located at Barrio Apas and Barrio
Kasambagan, Lahug, Cebu City, in the total amount of P2,229,078.79. Petitioner objected to such
demand for payment as baseless and unjustified, claiming in its favor the aforecited Section 14 of RA
6958 which exempts it from payment of realty taxes. It was also asserted that it is an instrumentality
of the government performing governmental functions, citing Section 133 of the Local Government
Code of 1991 which puts limitations on the taxing powers of local government units:

"Section 133. Common Limitations on the Taxing Powers of Local Government Units. -- Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
a) x x x
x x x
o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities,
and local government units"
Respondent City refused to cancel and set aside petitioner’s realty tax account, insisting that the
MCIAA is a government-controlled corporation whose tax exemption privilege has been withdrawn
by virtue of Sections 193 and 234 of the Local Government Code that took effect on January 1, 1992:

"Section 193. Withdrawal of Tax Exemption Privilege.— Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under RA No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.
Section 234. Exemptions from Real Property Taxes. — x x x
(a) x x x
x x x
(e) x x x
Except as provided herein, any exemption from payment of real property tax previously granted to, or
presently enjoyed by all persons, whether natural or juridical, including government-owned or
controlled corporations are hereby withdrawn upon the effectivity of this Code."

Issues:
Whether the parcels of land in question belong to the Republic of the Philippines whose beneficial
use has been granted to the petitioner, and

Whether the petitioner is a “taxable person.”

Ruling:

Section 15 of the petitioner’s Charter provides:

Sec. 15. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities,
runways, lands, buildings and other properties, movable or immovable, belonging to or presently
administered by the airports, and all assets, powers, rights, interests and privileges relating on airport
works or air operations, including all equipment which are necessary for the operations of air
navigation, aerodrome control towers, crash, fire, and rescue facilities are hereby transferred to the
Authority: Provided, however, that the operations control of all equipment necessary for the operation
of radio aids to air navigation, airways communication, the approach control office, and the area
control center shall be retained by the Air Transportation Office. No equipment, however, shall be
removed by the Air Transportation Office from Mactan without the concurrence of the Authority. The
Authority may assist in the maintenance of the Air Transportation Office equipment.

It may be reasonable to assume that the term “lands” refer to “lands” in Cebu City then administered
by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on
for real property taxes. This section involves a “transfer” of the “lands,” among other things, to the
 petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained
by the Republic of the Philippines.

This “transfer” is actually an absolute conveyance of the ownership thereof because the petitioner’s
authorized capital stock consists of, inter alia, “the value of such real estate owned and/or
administered by the airports.” Hence, the petitioner is now the owner of the land in question and the
exception in Section 234(c) of the LGC is inapplicable.

Moreover, the petitioner cannot claim that it was never a “taxable person” under its Charter. It was
only exempted from the payment of real property taxes. The grant of the privilege only in respect of
this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes,
except real property tax.

Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in
light of the foregoing disquisitions, it had already become, even if it be conceded to be an “agency” or
“instrumentality” of the Government, a taxable person for such purpose in view of the withdrawal in
the last paragraph of Section 234 of exemptions from the payment of real property taxes, which, as
earlier adverted to, applies to the petitioner.

Case Brief Mactan Cebu International Airport Authority vs Marcos et al GR No

120082 September 11 1996 Taxation Case Digest Mactan Cebu International Airport Authority
vs Marcos et al

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LEGAL NATURE

WHERE LEGALITY IS THE MAIN ISSUE...

SUNDAY, NOVEMBER 1, 2015

Mactan Int’l Airport vs. Lapu-lapu City, G.R. No. 181756, Case Digest

Petitioner, Mactan-Cebu International Airport Authority (MCIAA) was created by

Congress under Republic Act No. 6958. Upon its creation, petitioner enjoyed exemption
from realty taxes imposed by the National Government or any of its political
subdivision. However, upon the effectivity of the LGC the Supreme Court rendered a
decision that the petitioner is no longer exempt from realty estate taxes.

Respondent City issued to petitioner a Statement of Real Estate Tax assessing the lots
comprising the Mactan International Airport which included the airfield, runway, taxi
way and the lots on which these are built. Petitioner contends that these lots, and the
lots to which they are built, are utilized solely and exclusively for public purposes and
are exempt from real property tax. Petitioner based its claim for exemption on DOJ
Opinion No. 50.
Respondent issued notices of levy on 18 sets of real properties of petitioners. Petitioner
filed a petition for Prohibition, TRO, and a writ of preliminary injunction with RTC
Lapulapu which sought to enjoin respondent City from issuing the warrant of levy
against petitioner’s properties from selling them at public auction for delinquency in
realty tax obligations.

Petitioner claimed before the RTC that it had discovered that respondent City did not
pass any ordinance authorizing the collection of real property tax, a tax for the special
education fund (SEF), and a penalty interest for its nonpayment. Petitioner argued that
without the corresponding tax ordinances, respondent City could not impose and
collect real property tax, an additional tax for the SEF, and penalty interest from
petitioner.

RTC granted the writ of preliminary which was later on lifted upon motion by the
respondents.

(fait accompli)

RULING OF THE CA: Court of Appeals held that petitioner’s airport terminal building,
airfield, runway, taxiway, and the lots on which they are situated are not exempt from
real estate tax reasoning as follows: Under the Local Government Code (LGC for
brevity), enacted pursuant to the constitutional mandate of local autonomy, all natural
and juridical persons, including government-owned or controlled corporations
(GOCCs), instrumentalities and agencies, are no longer exempt from local taxes even if
previously granted an exemption. The only exemptions from local taxes are those
specifically provided under the Code itself, or those enacted through subsequent
legislation.

WHEREFORE, in view of the foregoing, judgment is hereby rendered by us as follows:

We DECLARE the airport terminal building, the airfield, runway, taxiway and the lots on
which they are situated NOT EXEMPT from the real estate tax imposed by the
respondent City of Lapu-Lapu;

We DECLARE the imposition and collection of the real estate tax, the additional levy for
the Special Education Fund and the penalty interest as VALID and LEGAL. However,
pursuant to Section 255 of the Local Government Code, respondent city can only collect
an interest of 2% per month on the unpaid tax which total interest shall, in no case,
exceed thirty-six (36) months;

We DECLARE the sale in public auction of the aforesaid properties and the eventual
forfeiture and purchase of the subject property by the respondent City of Lapu-Lapu as
NULL and VOID. However, petitioner MCIAA’s property is encumbered only by a limited
lien possessed by the respondent City of Lapu-Lapu in accord with Section 257 of the
Local Government Code.

RULING OF THE SUPREME COURT:

MIAA is not a government-owned or controlled corporation under Section 2(13) of the

Introductory Provisions of the Administrative Code because it is not organized as a
stock or non-stock corporation. Neither is MIAA a government-owned or controlled
corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not
required to meet the test of economic viability. MIAA is a government instrumentality
vested with corporate powers and performing essential public services pursuant to
Section 2(10) of the Introductory Provisions of the Administrative Code. As a
government instrumentality, MIAA is not subject to any kind of tax by local
governments under Section 133(o) of the Local Government Code. The exception to the
exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable
entity under the Local Government Code. Such exception applies only if the beneficial
use of real property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use
and thus are properties of public dominion. Properties of public dominion are owned
by the State or the Republic.

As properties of public dominion owned by the Republic, there is no doubt whatsoever

that the Airport Lands and Buildings are expressly exempt from real estate tax under
Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that
properties of public dominion are not subject to execution or foreclosure sale.

Petitioner’s properties that are actually, solely and exclusively used for public purpose,
consisting of the airport terminal building, airfield, runway, taxiway and the lots on
which they are situated, EXEMPT from real property tax imposed by the City of Lapu-
Lapu.

VOID all the real property tax assessments, including the additional tax for the special
education fund and the penalty interest, as well as the final notices of real property tax
delinquencies, issued by the City of Lapu-Lapu on petitioner’s properties, except the
assessment covering the portions that petitioner has leased to private parties.

NULL and VOID the sale in public auction of 27 of petitioner’s properties and the
eventual forfeiture and purchase of the said properties by respondent City of Lapu-
Lapu. We likewise declare VOID the corresponding Certificates of Sale of Delinquent
Property issued to respondent City of Lapu-Lapu.