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:

1. 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;
2. 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.

1. 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.
2. 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.
3. 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.