Manila International Airport Authority vs. Court of Appeals, Paranque City G.R. No.
155650 MIAA is also not a non-stock corporation because it has no members. A non-stock corporation
July 20, 2006
FACTS:
MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the
taxable years 1992 to 2001. MIAA’s real estate tax delinquency was estimated at P624 million.
The City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on
the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at
public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax
delinquency.
MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with
prayer for preliminary injunction or temporary restraining order. The petition sought to
restrain the City of Parañaque from imposing real estate tax on, levying against, and auctioning
for public sale the Airport Lands and Buildings.
Paranaque’s Contention: Section 193 of the Local Government Code expressly withdrew the
tax exemption privileges of “government-owned and-controlled corporations” upon the
effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory
construction is that the express mention of one person, thing, or act excludes all others. An
international airport is not among the exceptions mentioned in Section 193 of the Local
Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands
and Buildings are exempt from real estate tax.
MIAA’s contention: Airport Lands and Buildings are owned by the Republic. The government
cannot tax itself. The reason for tax exemption of public property is that its taxation would not
inure to any public advantage, since in such a case the tax debtor is also the tax creditor.
ISSUE: Whether Airport Lands and Buildings of MIAA are exempt from real estate tax under
existing laws?
RULING:
Yes. Ergo, the real estate tax assessments issued by the City of Parañaque, and all proceedings
taken pursuant to such assessments, are void.
1. MIAA is Not a Government-Owned or Controlled Corporation
MIAA is not a government-owned or controlled corporation but an instrumentality of the
National Government and thus exempt from local taxation.
MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has
no stockholders or voting shares.
must have members.
MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only
difference is that MIAA is vested with corporate powers.
When the law vests in a government instrumentality corporate powers, the instrumentality
does not become a corporation. Unless the government instrumentality is organized as a stock
or non-stock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers.
Thus, MIAA exercises the governmental powers of eminent domain, police authority and the
levying of fees and charges. At the same time, MIAA exercises “all the powers of a corporation
under the Corporation Law, insofar as these powers are not inconsistent with the provisions of
this Executive Order.”
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion
and therefore owned by the State or the Republic of the Philippines.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil
Code, like “roads, canals, rivers, torrents, ports and bridges constructed by the State,” are
owned by the State. The term “ports” includes seaports and airports. The MIAA Airport Lands
and Buildings constitute a “port” constructed by the State. Under Article 420 of the Civil Code,
the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the
State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they are used by the public
for international and domestic travel and transportation. The fact that the MIAA collects
terminal fees and other charges from the public does not remove the character of the Airport
Lands and Buildings as properties for public use.
The charging of fees to the public does not determine the character of the property whether it
is of public dominion or not. Article 420 of the Civil Code defines property of public dominion
as one “intended for public use.” The terminal fees MIAA charges to passengers, as well as the
landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the
operations of MIAA. The collection of such fees does not change the character of MIAA as an
airport for public use. Such fees are often termed user’s tax. This means taxing those among
1
the public who actually use a public facility instead of taxing all the public including those who
never use the particular public facility.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Court has also ruled that property of public dominion, being outside the commerce of
man, cannot be the subject of an auction sale.

Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale
of any property of public dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to encumbrances, foreclosures
and auction sale. This will happen if the City of Parañaque can foreclose and compel the
auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section
48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold
title to real properties owned by the Republic. n MIAA’s case, its status as a mere trustee of the
Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of
conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of
conveyance.

d. Transfer to MIAA was Meant to Implement a Reorganization

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA
was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The
purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate
and autonomous body. The Republic remains the beneficial owner of the Airport Lands and
Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights
over MIAA’s assets adverse to the Republic.

e. Real Property Owned by the Republic is Not Taxable

Sec 234 of the LGC provides that real property owned by the Republic of the Philippines or any
of its political subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person following are exempted from payment of the
real property tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are
not exempt from real estate tax. For example, the land area occupied by hangars that MIAA
leases to private corporations is subject to real estate tax.

2
Funa1 v Manila Economic and Cultural Office GR No. 193462 Feb. 4, 2014
RECIT READY: Because the Philippines subscribes to the One China Policy of the People’s
Republic of China, it ended its diplomatic relations with Taiwan. However it continued to
maintain an unofficial relationship with Taiwan through the MECO. Funa asked COA to furnish
him with financial and audit reports of COA’s audit of MECO. COA initially said that MECO was
not under its audit jurisdiction. This prompted Funa to file this petition for mandamus. COA
subsequently sent auditors to Taiwan. Funa argues that MECO is a GOCC or at least a
governmental entity subject to the audit jurisdiction of COA. MECO argues that it is not a GOCC
nor is it a governmental instrumentality and to categorize it as such would violate the one
china policy of PROC. COA concedes that MECO is under its audit jurisdiction because of certain
fees that MECO handles which are receivables of DOLE but insists that the case is moot
because it already sent a team to audit MECO. SC ruled that the case was not moot since it falls
under the exceptions. That MECO is not a GOCC nor is it a governmental entity. MECO is in fact
a sui generis entity. However certain transactions of MECO are subject to the audit jurisdiction
of COA particularly its collection of Verification fees and Consular fees.
DOCTRINE. The MECO is not a GOCC or government instrumentality. It is a sui generis private
entity especially entrusted by the government with the facilitation of unofficial relations with
the people in Taiwan without jeopardizing the country’s faithful commitment to the One China
policy of the PROC. However, despite its non-governmental character, the MECO handles
government funds in the form of the "verification fees" it collects on behalf of the DOLE and
the "consular fees" it collects under Section 2(6) of EO No. 15, s. 2001. Hence, under existing
laws, the accounts of the MECO pertaining to its collection of such "verification fees" and
"consular fees" should be audited by the COA.
FACTS:
 After the Chinese civil war, China was left with 2 governments each asserting its
sovereignty (these are the communist People’s Republic of China (PROC)2 and the
nationalist Republic of China (ROC)3). Both adhered to a policy of “One China”, viewing
that there is only one legitimate government in China, but they differed in their respective
interpretations to which government it is.
1 Funa is the chair of the Civil Service Commission appointed by then president GMA.
2 Controls the mainland territories
3 Controls Taiwan
 With the existence of two governments with conflicting claims of sovereignty, came the
question as to which of the two is deserving of recognition as that country’s legitimate
government.
 The Philippines formally ended its official diplomatic relations with the government in
Taiwan (ROC), when the Philippines and the PROC expressed mutual recognition thru the
Joint Communiqué4. Under the Joint Communiqué, the Philippines stated its adherence to
the One China policy of the PROC.
 However, such did not keep the Philippines from keeping unofficial relations with Taiwan
on a “people–to–people” basis. Hence, Taiwan and Philippines maintained an unofficial
relationship facilitated by the offices of the Taipei Economic and Cultural Office, for the
former, and the MECO, for the latter.
 The MECO was organized as a non–stock, non–profit corporation under BP Blg. 68 or the
Corporation Code. It is the corporate entity “entrusted” by the Philippine government
with the responsibility of fostering “friendly” and “unofficial” relations with the people of
Taiwan, particularly in the areas of trade, economic cooperation, investment, cultural,
scientific and educational exchanges. The MECO was “authorized” by the government to
perform certain “consular and other functions” that relates to the promotion, protection
and facilitation of Philippine interests in Taiwan.
 At present, MECO oversees the rights and interests of OFWs in Taiwan; promotes the
Philippines as a tourist and investment destination for the Taiwanese; and facilitates the
travel of Filipinos and Taiwanese from Taiwan to the Philippines, and vice versa.
 Funa wrote to COA requesting for the latest financial and audit report of MECO. He
invoked his constitutional right to information on matters of public concern. He believed
that MECO was under the supervision of DTI and is a GOCC thus subject to the audit
jurisdiction of COA.
 COA asst. Commissioner Naranjo issued a memorandum which stated that MECO is not
among the agencies audited by any of the three clusters of the Corporate Government
Sector.
 Funa: filed a mandamus petition in his capacity as "taxpayer, concerned citizen, a member
of the Philippine Bar and law book author”. He alleged that COA neglected its duty under
4Joint Communiqué of the Government of the Republic of the Philippines and the Government
of the People’s Republic of China
3
 the Constitution5. He claimed that MECO was a GOCC or at least a government 2. GOCCs with original charters
instrumentality whose funds partake the nature of public funds. 3. GOCCs without original charters
 MECO: prays for the dismissal of the mandamus based on procedural (it’s prematurely 4. Constitutional bodies, commissions and offices that have been granted fiscal
filed. Funa never demanded for COA to make an audit) and substantial grounds (MECO is autonomy under the Constitution; and
not a GOCC. The “desire letter” that the President sends to MECO is merely 5. Non-governmental entities receiving subsidy or equity, directly or indirectly from or
recommendatory and not binding on the corporation (in relation to the election of the through the government, which are required by law or the granting institution to
Board of MECO). In the end the members are the ones who elect the directors and these submit to the COA for audit as a condition of subsidy or equity.
directors are private individuals and not government officials.)
 COA: wanted the petition to be dismissed on procedural grounds and that the issue is Complementing the constitutional power of the COA to audit accounts of "non-governmental
already moot (since the COA Chair already sent a team to Taiwan to audit MECO and entities receiving subsidy or equity xxx from or through the government" is Section 29(1)80 of
the Audit Code, which grants the COA visitorial authority over the following non-governmental
other government agencies based there).
entities:
 COA concedes that MECO is within its jurisdiction, it maintains that MECO is not a GOCC
nor is it a government instrumentality instead MECO is a non-governmental entity. MECO 1. Non-governmental entities "subsidized by the government";
may still be audited with respect to Verification Fees6. 2. Non-governmental entities "required to pay levy or government share";
3. Non-governmental entities that have "received counterpart funds from the
ISSUE: government"; and
WON MECO is a Governmental entity and is subject to the audit jurisdiction of COA? NO. It’s 4. Non-governmental entities "partly funded by donations through the government."
not a governmental entity.
The Administrative Code also empowers the COA to examine and audit "the books, records and
HELD: accounts" of public utilities "in connection with the fixing of rates of every nature, or in relation
to the proceedings of the proper regulatory agencies, for purposes of determining franchise
No. The MECO is a non–governmental entity. However, under existing laws, the accounts of tax."
the MECO pertaining to the “verification fees” it collects on behalf of the DOLE as well as the
fees it was authorized to collect under Section 2(6) of EO No. 15, s. 2001, are subject to the The Meco is not a GOCC or a government instrumentality
audit jurisdiction of the COA. Such fees pertain to the government and should be audited by
Government instrumentalities are agencies of the national government that, by reason of
the COA.
some "special function or jurisdiction" they perform or exercise, are allotted "operational
Under SEC 2(1) ART IX-D of the constitution, COA was vested with the power, authority and autonomy" and are "not integrated within the department framework. They include:
duty to examine, audit and settle the accounts(revenue," "receipts," "expenditures" and "uses
1. regulatory agencies
of funds and property") of the following entitites:
2. chartered institutions
1. Government , or any of its subdivisions, agencies and instrumentalities 3. government corporate entities or government instrumentalities with corporate
powers (GCE/GICP)
5Sec. 2(1) Art IX-D of the Consti – stating that COA should audit the accounts of a GOCC 4. GOCCs.
6 These fees are what MECO collects from Taiwanese employers. A portion of these fees are
remitted to DOLE. GOCCs: "stock or non-stock" corporations "vested with functions relating to public needs" that
are "owned by the Government directly or through its instrumentalities."

4
By definition, three attributes thus make an entity a GOCC: first, its organization as stock or
non-stock corporation; second, the public character of its function; and third, government
ownership over the same. Possession of all three attributes is necessary to deem an entity a
GOCC. MECO lacks the 3rd attribute (as discussed below):
MECO is a non-stock corporation based on the records and based on the fact that its
earnings are not distributed as dividends to its members
MECO performs functions with a Public Aspect. MECO was "authorized" by the
Philippine government to perform certain "consular and other functions" relating to
the promotion, protection and facilitation of Philippine interests in Taiwan. The
functions of the MECO are of the kind that would otherwise be performed by the
Philippines’ own diplomatic and consular organs, if not only for the government’s
acquiescence that they instead be exercised by the MECO.
The MECO Is Not Owned or Controlled by the Government. The "desire letters" that
the President transmits are merely recommendatory and not binding on it. Under its
by-laws, the election of its directors are done by the members themselves, its officers
are elected by the directors and members are admitted through a unanimous board
resolution. None of the incorporators of MECO were government officials and up to
this day, none of the members, directors or officers are government appointees or
public officers designated by reason of their office.
SC: it is a sui generis entity
Since MECO is not a GOCC, it cannot also be either of the other government instrumentalities
primarily because these instrumentalities are creatures of law (meaning an actual law was
passed for their creation) while MECO was incorporated under the Corporation code.
The reason behind it being under the supervision of the DTI is because its functions may result
in it engaged in dealings or activities that can directly contradict the Philippines’ commitment
to the One China Policy. This scenario can be avoided if theExecutive exercises some sort of
supervision over it. But this aspect was not questioned by the petitioner, so this was deemed
irrelevant to the issue by the SC.
Certain accounts may be audited by the COA
MECO should be subjected to the auditing of COA as regards its collection of verification and
consular fees.
Pertinent is the provision of the Administrative Code, Section 14(1), Book V thereof, which
authorizes the COA to audit accounts of non–governmental entities “required to pay xxx or
have government share” but only with respect to “funds xxx coming from or through the
government.” The said fees collected by MECO are receivables of DOLE.
As to the verification fees ("service fee for the verification of overseas employment contracts,
recruitment agreement or special powers of attorney"): Under Section 7 of EO No. 1022, DOLE
has the authority to collect verification fees. But it entered into a series of MoA with MECO
authorizing the latter to collect such fees since the PH does not have an official post in Taiwan.
As to the consular fees: The authority behind “consular fees” is Section 2(6) of EO No. 15, s.
2001. The said section authorizes the MECO to collect “reasonable fees” for its performance of
consular functions. Evidently, and just like the peculiarity that attends the DOLE “verification
fees,” there is no consular office for the collection of the “consular fees.” Thus, the authority
for the MECO to collect the “reasonable fees,” vested unto it by the executive order (EO No.
15, s. 2001)
Conclusion
The MECO is not a GOCC or government instrumentality. It is a sui generis private entity
especially entrusted by the government with the facilitation of unofficial relations with the
people in Taiwan without jeopardizing the country’s faithful commitment to the One China
policy of the PROC. However, despite its non–governmental character, the MECO handles
government funds in the form of the “verification fees” it collects on behalf of the DOLE and
the “consular fees” it collects. Hence, under existing laws, the accounts of the MECO pertaining
to its collection of such “verification fees” and “consular fees” should be audited by the COA.
OTHER ISSUES:
Procedural issues:
Mootness: the issue is not moot. Despite the existence of supervening events( the eventual
auditing done by COA in Taiwan), the issue is within the exceptions of rule on dismissal of moot
cases.
1. The issue deals with a supposed grave violation of the constitution ( Funa alleged that
COA neglected to audit MECO),
2. that the issue is of paramount public interest (the failure of COA to audit MECO if it
was supposed to audit MECO shows that COA failed to fulfill its duties as guardian of
5
 the public treasury AND the status of MECO has a direct bearing on the country’s
commitment to the One China Policy)
3. and that it is susceptible to repetition (COA suddenly decided to audit MECO, unless
the issue is decided, the successor of the current COA chair might decide to not
auditing MECO)
Standing: the instant petition raises issues of transcendental importance
Principle of Hierarchy of Courts: transcendental importance of the issues raised in the
mandamus petition, hence the court waives this procedural issue
BOY SCOUT OF THE PHILIPPINES VS COMMISSION ON AUDIT
Facts:
COA issued a Resolution No. 99-011 on August 19, 1999, with the subject “Defining the
Commission’s Policy with respect to the audit of the Boy Scout of the Philippines.” The BSP
which was created as a public corporation, and that in BSP vs. NLRC, the Supreme Court ruled
that the BSP, as constituted under its charter, was a Government Owned and Controlled
Corporation within the meaning of Art. IX (B) (2) (1) of the Constitution, and that the BSP is
regarded as a government instrumentality under the Administrative Code. For the purposes of
audit supervision, the BSP shall be classified among the government corporations to be audited
by employing the team audit approach. The BSP sought reconsideration of the COA Resolution
in a letter signed by then BSP National President Jejomar C. Binay, saying that it is not subject
to the COA’s jurisdiction.
Issues:
Whether or not the Boy Scout of the Philippines is a government owned and controlled
corporation?
Whether or not it is under the jurisdiction of the COA?
The Ruling of the court:
After looking at the legislative history of its amended charter and carefully studying the
applicable laws and the arguments of both parties, The SC finds that the BSP is a public
corporation and its funds are subject to the COA’s audit jurisdiction.
The BSP is a public corporation or a government agency or instrumentality with juridical
personality, which does not fall within the constitutional prohibition in Article XII, Section 16,
notwithstanding the amendments to its charter. Not all corporations, which are not
government owned or controlled, are ipso facto to be considered private corporations as there
exists another distinct class of corporations or chartered institutions which are otherwise
known as "public corporations." These corporations are treated by law as agencies or
instrumentalities of the government which are not subject to the tests of ownership or control
and economic viability but to different criteria relating to their public purposes/interests or
constitutional policies and objectives and their administrative relationship to the government
or any of its Departments or Offices.
Since the BSP, under its amended charter, continues to be a public corporation or a
government instrumentality, we come to the inevitable conclusion that it is subject to the
exercise by the COA of its audit jurisdiction in the manner consistent with the provisions of the
BSP Charter.
6
 Boy Scouts of the Philippines vs. Commission on Audit
G.R. No. 177131, June 7, 2011
FACTS: The Commission on Audit issued COA Resolution No. 99-011 in which the said
resolution state that the BSP was created as a public corporation under Commonwealth Act
No. 111, as amended by Presidential Decree No. 460 and Republic Act No. 7278; that in Boy
Scouts of the Philippines vs. National Labor Relations Commission, the Supreme Court ruled
that the BSP, as constituted under its charter, was a “government-controlled corporation
within the meaning of Article IX (B)(2)(1) of the Constitution; and that “the BSP is appropriately
regarded as a government instrumentality under the 1987 Administrative Code.”
The BSP sought reconsideration of the COA Resolution in a letter signed by the BSP
National President Jejomar Binay. He claimed that RA 7278 eliminated the “substantial
government participation” in the National Executive Board by removing: (i) the President of the
Philippines and executive secretaries, with the exception of the Secretary of Education, as
members thereof; and (ii) the appointment and confirmation power of the President of the
Philippines, as Chief Scout, over the members of the said Board.
The BSP further claimed that the 1987 Administrative Code itself, of which the BSP s.
NLRC relied on for some terms, defines government-owned and controlled corporations as
agencies organized as stock or non-stock corporations which the BSP, under its present charter,
is not.
And finally, they claim that the Government, like in other GOCCs, does not have
funds invested in the BSP. The BSP is not an entity administering special funds. The BSP is
neither a unit of the Government; a department which refers to an executive department as
created by law; nor a bureau which refers to any principal subdivision or unit of any
department.
ISSUE: Whether the BSP falls under the COA’s audit jurisdiction.
RULING: After considering the legislative history of the amended charter and the applicable
laws and the arguments of both parties, the Court found that the BSP is a public corporation
and its funds are subject to the COA’s audit jurisdiction.
The BSP Charter created the BSP as a “public corporation” to serve the following
public interest or purpose: xxx to promote through organization and cooperation with other
agencies, the ability of boys to do useful things for themselves and others, to train them in
scout craft, and to inculcate in them patriotism, civic consciousness and responsibility, courage,
self-reliance, discipline and kindred virtues, and moral values, using the method which are in
common use by boy scouts.
The purpose of the BSP as stated in its amended charter shows that it was created in
order to implement a State policy declared in Article II, Section 13 of the Constitution.
Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit of a
constitutional mandate, comes within the class of “public corporations” defined by paragraph
2, Article 44 of the Civil Code and governed by the law which creates it, pursuant to Article 45
of the same Code.
The Constitution emphatically prohibits the creation of private corporations except
by a general law applicable to all citizens. The purpose of this constitutional provision is to ban
private corporations created by special charters, which historically gave certain individuals,
families or groups special privileges denied to other citizens.
The BSP is a public corporation or a government agency or instrumentality with
juridical personality, which does not fall within the constitutional prohibition in Article XII,
Section 16, notwithstanding the amendments to its charter. Not all corporations, which are not
government owned or controlled, are ipso facto to be considered private corporations as there
exist another distinct class of corporations or chartered institutions which are otherwise known
as “public corporations.” These corporations are treated by law as agencies or
instrumentalities of the government which are not subject to the test of ownership or control
and economic viability but to different criteria relating to their public purposes/interests or
constitutional policies and objectives and their administrative relationship to the government
or any of its Departments or Offices.
Since BSP, under its amended charter, continues to be a public corporation or a
government instrumentality, the Court concludes that it is subject to the exercise by the COA
of its audit jurisdiction in the manner consistent with the provisions of the BSP Charter.
7
 THE VETERANS FEDERATION OF THE PHILIPPINES vs.  Whether or not the department circular unduly encroached on the prerogatives of
Hon. ANGELO T. REYES; and Hon. EDGARDO E. BATENGA VFP’s governing body.
G. R. No. 155027, February 28, 2006
RULING:

FACTS: The Veterans Federation of the Philippines was created under Rep. Act No. 2640. The
DND Secretary issued the assailed DND Department Circular No. 04 entitled, "Further The Court ruled the following: (1) assailed DND Department Circular No. 04 does not
Implementing the Provisions of Sections 1 and 2 of Republic Act No. 2640.
supplant nor modify and is, on the contrary, perfectly in consonance with Rep. Act No. 2640;
Pursuant to the assailed Circular, the DND sought to audit VFP. The VFP complained about the and (2) that VFP is a public corporation. As such, it can be placed under the control and
alleged broadness of the scope of the management audit and requested its suspension. This
was denied. supervision of the Secretary of National Defense, who consequently has the power to conduct
an extensive management audit of VFP.
VFP argued that it is a private non-government organization. To support its argument, it
contended: (1) that it does not possess the elements of a public office, particularly the
possession/delegation of a portion of sovereign power of government; (2) that its funds are not The functions of the VFP are executive functions
public funds because it receives no government funds as its funds come from membership
dues, and the lease rentals; (3) that it retains its essential character as a private, civilian
federation of veterans voluntarily formed by the veterans themselves where membership is The delegation to the individual of some of the sovereign functions of government is
voluntary and is governed by the Labor Code and SSS law; (4) that the Administrative Code of "[t]he most important characteristic" in determining whether a position is a public office or
1987 does not provide that the VFP is an attached agency; and (5) that the DBM declared that
the VFP is a non-government organization and issued a certificate that the VFP has not been a not.
direct recipient of any funds released by the DBM.
In several cases, the Court has dealt with this issue which deals with activities not
ISSUES:
immediately apparent to be sovereign functions. It upheld the public sovereign nature of
operations needed either to promote social justice or to stimulate patriotic sentiments and
Central Issue: Whether or not the Veterans Federation of the Philippines is a private
love of country.
corporation.

In the case at bar, the functions of the VFP fall within the category of sovereign
 Whether or not the challenged department circular passed in the valid exercise of the
functions. The protection of the interests of war veterans is not only meant to promote social
respondent Secretary’s "control and supervision."
justice, but is also intended to reward patriotism.
 Whether or not the challenged department circular validly lay standards classifying
the VFP, an essentially civilian organization, within the ambit of statutes only
applying to government entities.

8
 The functions of the VFP are executive functions to provide immediate and adequate
care, benefits and other forms of assistance to war veterans and veterans of military
campaigns, their surviving spouses and orphans.
VFP funds are public funds
The fact that no budgetary appropriations have been released to the VFP by the DBM
does not prove that it is a private corporation. Assuming that the DBM believed that the VFP is
a private corporation, it is an accepted principle that the erroneous application of the law by
public officers does not bar a subsequent correct application of the law.
The funds in the hands of the VFP from whatever source are public funds, and can be
used only for public purposes. As the Court ruled in Republic v. COCOFED, "(e)ven if the money
is allocated for a special purpose and raised by special means, it is still public in character."
There is nothing wrong, whether legally or morally, from raising revenues through non-
traditional methods.
Membership of the VFP is not the individual
membership of the affiliate organizations
VFP claims that the Secretary of National Defense "historically did not indulge in the
direct or ‘micromanagement’ of the VFP. This reliance of petitioner on what has "historically"
been done is erroneous, since laws are not repealed by disuse, custom, or practice to the
contrary.
Neither is the civilian nature of VFP relevant because the Constitution does not
contain any prohibition against the grant of control and/or supervision to the Secretary of
National Defense over a civilian organization.
The Administrative Code did not
repeal or modify RA 2640
The Administrative Code, by giving definitions of the various entities covered by it,
acknowledges that its enumeration is not exclusive. The Administrative Code could not be said
to have repealed nor enormously modified RA 2640 by implication, as such repeal or enormous
modification by implication is not favored in statutory construction.
DBM opinion is not persuasive
VFP’s claim that the supposed declaration of the DBM that petitioner is a non-
government organization is not persuasive, since DBM is not a quasi-judicial agency. The
persuasiveness of the DBM opinion has, however, been overcome by all the previous
explanations we have laid so far.
The fate of Department Circular No. 04
The Court has defined the power of control as "the power of an officer to alter or
modify or nullify or set aside what a subordinate has done in the performance of his duties and
to substitute the judgment of the former to that of the latter." The power of supervision, on
the other hand, means "overseeing, or the power or authority of an officer to see that
subordinate officers perform their duties."
Since the Court has also previously determined that VFP funds are public funds, there
is likewise no reason to declare this provision invalid. Having in their possession public funds,
the officers of the VFP, especially its fiscal officers, must indeed share in the fiscal responsibility
to the greatest extent.
9
 PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY v CA
FACTS:
 The PFDA was created by then President Marcos and became an attached agency of
the Department of Agriculture.
 Meanwhile, the then Ministry of Public Works and Highways reclaimed from the sea
a 21-hectare parcel of land in Barangay Tanza, Iloilo City, and constructed thereon
the Iloilo Fishing Port Complex (IFPC), consisting of breakwater, a landing quay, a
refrigeration building, a market hall, a municipal shed, an administration building, a
water and fuel oil supply system and other port related facilities and machineries.
- Upon its completion, the Ministry of Public Works and Highways turned
over IFPC to the Authority, pursuant to Section 11 of PD 977, which places
fishing port complexes and related facilities under the governance and
operation of the PFDA.
- Notwithstanding said turn over, title to the land and buildings of the IFPC
remained with the Republic.
 The Authority thereafter leased portions of IFPC to private firms and individuals
engaged in fishing related businesses.
 Sometime in May 1988, the City of Iloilo assessed the entire IFPC for real property
taxes.
ISSUES:
1.) Whether or not PFDA is liable to pay real property tax to the City of Iloilo.
HELD:
Yes but only insofar as those properties which are leased to private firms and
individuals!
The Court rules that the Authority is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property tax. However, said
exemption does not apply to the portions of the IFPC which the Authority leased to private
entities. With respect to these properties, the Authority is liable to pay real property tax.
The Authority which is tasked with the special public function to carry out the
government’s policy "to promote the development of the country’s fishing industry and
improve the efficiency in handling, preserving, marketing, and distribution of fish and other
aquatic products," exercises the governmental powers of eminent domain, and the power to
levy fees and charges. At the same time, the Authority exercises "the general corporate powers
conferred by laws upon private and government-owned or controlled corporations."
In light of the foregoing, the Authority should be classified as an instrumentality of the
national government which is liable to pay taxes only with respect to the portions of the
property, the beneficial use of which were vested in private entities. When local governments
invoke the power to tax on national government instrumentalities, such power is construed
strictly against local governments. The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. Any doubt whether a person, article or activity is
taxable is resolved against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.20
Thus, the real property tax assessments issued by the City of Iloilo should be upheld only
with respect to the portions leased to private persons. In case the Authority fails to pay the real
property taxes due thereon, said portions cannot be sold at public auction to satisfy the tax
delinquency. In Chavez v. Public Estates Authority it was held that reclaimed lands are lands of
the public domain and cannot, without Congressional fiat, be subject of a sale, public or private
In sum, the Court finds that the Authority is an instrumentality of the national government,
hence, it is liable to pay real property taxes assessed by the City of Iloilo on the IFPC only with
respect to those portions which are leased to private entities. Notwithstanding said tax
delinquency on the leased portions of the IFPC, the latter or any part thereof, being a property
of public domain, cannot be sold at public auction. This means that the City of Iloilo has to
satisfy the tax delinquency through means other than the sale at public auction of the IFPC.
In Manila International Airport Authority (MIAA) v. Court of Appeals,9 the Court made a
distinction between a GOCC and an instrumentality. Thus:
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987
defines a government-owned or controlled corporation as follows:
10
 SEC. 2. General Terms Defined. – x x x
(13) Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of its capital
stock: x x x (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or
non-stock corporation." MIAA is not organized as a stock or non-stock corporation.
MIAA is not a stock corporation because it has no capital stock divided into shares.
MIAA has no stockholders or voting shares.
xxxx
Section 3 of the Corporation Code defines a stock corporation as one whose "capital
stock is divided into shares and x x x authorized to distribute to the holders of such
shares dividends x x x." MIAA has capital but it is not divided into shares of stock.
MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of
the Corporation Code defines a non-stock corporation as "one where no part of its
income is distributable as dividends to its members, trustees or officers." A non-
stock corporation must have members. Even if we assume that the Government is
considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to
their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its
annual gross operating income to the National Treasury. This prevents MIAA from
qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are
"organized for charitable, religious, educational, professional, cultural, recreational,
fraternal, literary, scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers." MIAA is not organized for any of these
purposes. MIAA, a public utility, is organized to operate an international and
domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
government-owned or controlled corporation.10 (Emphasis supplied)
Thus, for an entity to be considered as a GOCC, it must either be organized as a stock or non-
stock corporation. Two requisites must concur before one may be classified as a stock
corporation, namely: (1) that it has capital stock divided into shares, and (2) that it is
authorized to distribute dividends and allotments of surplus and profits to its stockholders. If
only one requisite is present, it cannot be properly classified as a stock corporation. As for non-
stock corporations, they must have members and must not distribute any part of their income
to said members.11
On the basis of the parameters set in the MIAA case, the Authority should be classified as an
instrumentality of the national government. As such, it is generally exempt from payment of
real property tax, except those portions which have been leased to private entities.
In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as among
the instrumentalities of the national government. Thus –
Some of the national government instrumentalities vested by law with juridical
personalities are:Bangko Sentral ng Pilipinas, Philippine Rice Research Institute,
Laguna Lake Development Authority, Fisheries Development Authority, Bases
Conversion Development Authority, Philippine Ports Authority, Cagayan de Oro Port
Authority, San Fernando Port Authority, Cebu Port Authority, and Philippine National
Railways.
Indeed, the Authority is not a GOCC but an instrumentality of the government. The Authority
has a capital stock but it is not divided into shares of stocks.12 Also, it has no stockholders or
voting shares. Hence, it is not a stock corporation. Neither it is a non-stock corporation because
it has no members.
The Authority is actually a national government instrumentality which is defined as an agency
of the national government, not integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a
charter.13 When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers.
11
Thus, the Authority which is tasked with the special public function to carry out the
government’s policy "to promote the development of the country’s fishing industry and
improve the efficiency in handling, preserving, marketing, and distribution of fish and other
aquatic products," exercises the governmental powers of eminent domain,14 and the power to
levy fees and charges.15 At the same time, the Authority exercises "the general corporate
powers conferred by laws upon private and government-owned or controlled corporations."16

The MIAA case held17 that unlike GOCCs, instrumentalities of the national government, like
MIAA, are exempt from local taxes pursuant to Section 133(o) of the Local Government Code.
This exemption, however, admits of an exception with respect to real property taxes. Applying
Section 234(a) of the Local Government Code, the Court ruled that when an instrumentality of
the national government grants to a taxable person the beneficial use of a real property owned
by the Republic, said instrumentality becomes liable to pay real property tax. Thus, while MIAA
was held to be an instrumentality of the national government which is generally exempt from
local taxes, it was at the same time declared liable to pay real property taxes on the airport
lands and buildings which it leased to private persons. It was held that the real property tax
assessments and notices of delinquencies issued by the City of Pasay to MIAA are
void except those pertaining to portions of the airport which are leased to private parties.
Pertinent portions of the decision, reads:

Section 193 of the Local Government Code expressly withdrew the tax exemption of
all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o)
of the Local Government Code expressly provides otherwise, specifically prohibiting
local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) states:

SEC. 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:

12
 Feliciano vs. Commission on Audit
[GR 147402, 14 January 2004]
Facts: A Special Audit Team from Commission on Audit (COA) Regional Office No. VIII
audited the accounts of the Leyte Metropolitan Water District (LMWD). Subsequently,
LMWD received a letter from COA dated 19 July 1999 requesting payment of auditing
fees. As General Manager of LMWD, Engr. Ranulfo C. Feliciano sent a reply dated 12
October 1999 informing COA’s Regional Director that the water district could not pay
the auditing fees. Feliciano cited as basis for his action Sections 6 and 20 of PD 198, as
well as Section 18 of RA 6758. The Regional Director referred Feliciano’s reply to the
COA Chairman on 18 October 1999. On 19 October 1999, Feliciano wrote COA
through the Regional Director asking for refund of all auditing fees LMWD previously
paid to COA. On 16 March 2000, Feliciano received COA Chairman Celso D. Gangan’s
Resolution dated 3 January 2000 denying Feliciano’s request for COA to cease all audit
services, and to stop charging auditing fees, to LMWD. The COA also denied
Feliciano’s request for COA to refund all auditing fees previously paid by LMWD.
Feliciano filed a motion for reconsideration on 31 March 2000, which COA denied on 30
January 2001. On 13 March 2001, Felicaino filed the petition for certiorari.
incorporation, no incorporators and no stockholders or members. There are no
stockholders or members to elect the board directors of LWDs as in the case of all
corporations registered with the Securities and Exchange Commission. The local mayor
or the provincial governor appoints the directors of LWDs for a fixed term of office.
LWDs exist by virtue of PD 198, which constitutes their special charter. Since under the
Constitution only government-owned or controlled corporations may have special
charters, LWDs can validly exist only if they are government-owned or controlled. To
claim that LWDs are private corporations with a special charter is to admit that their
existence is constitutionally infirm. Unlike private corporations, which derive their legal
existence and power from the Corporation Code, LWDs derive their legal existence and
power from PD 198

Issue: Whether a Local Water District (“LWD”) is a government-owned or controlled

corporation.

Held: The Constitution recognizes two classes of corporations. The first refers to
private corporations created under a general law. The second refers to government-
owned or controlled corporations created by special charters. The Constitution
emphatically prohibits the creation of private corporations except by a general law
applicable to all citizens. The purpose of this constitutional provision is to ban private
corporations created by special charters, which historically gave certain individuals,
families or groups special privileges denied to other citizens. In short, Congress cannot
enact a law creating a private corporation with a special charter. Such legislation would
be unconstitutional. Private corporations may exist only under a general law. If the
corporation is private, it must necessarily exist under a general law. Stated differently,
only corporations created under a general law can qualify as private corporations.
Under existing laws, that general law is the Corporation Code, except that the
Cooperative Code governs the incorporation of cooperatives. The Constitution
authorizes Congress to create government-owned or controlled corporations through
special charters. Since private corporations cannot have special charters, it follows that
Congress can create corporations with special charters only if such corporations are
government-owned or controlled. Obviously, LWDs are not private corporations
because they are not created under the Corporation Code. LWDs are not registered
with the Securities and Exchange Commission. Section 14 of the Corporation Code
states that “[A]ll corporations organized under this code shall file with the Securities and
Exchange Commission articles of incorporation x x x.” LWDs have no articles of

13
 CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC ZONE AUTHORITY; PROVINCE OF BATAAN,
REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER
CAPACITY AS PROVINCIAL TREASURER OF BATAAN vs. PHILIPPINE ECONOMIC ZONE
AUTHORITY, G.R. No. 184203, G.R. NO. 187583, November 26, 2014
J. Leonen
FACTS:
These are consolidated petitions for review on certiorari the City of Lapu-Lapu and the Province
of Bataan separately filed against the Philippine Economic Zone Authority (PEZA).
In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals’ decision dated
January 11, 2008 and resolution dated August 6, 2008, dismissing the City’s appeal for being
the wrong mode of appeal. The City appealed the Regional Trial Court, Branch 111, Pasay City’s
decision finding the PEZA exempt from payment of real property taxes.
In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals’ decision
dated August 27, 2008 and resolution dated April 16, 2009, granting the PEZA’s petition for
certiorari. The Court of Appeals ruled that the Regional Trial Court, Branch 115, Pasay City
gravely abused its discretion in finding the PEZA liable for real property taxes to the Province of
Bataan.
ISSUE: Whether the PEZA is exempt from payment of real property taxes?
RULING:
The PEZA is exempt from payment of real property taxes.
The PEZA is an instrumentality of the national government
An instrumentality is “any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter.
With the PEZA as an attached agency to the Department of Trade and Industry, the 13-person
PEZA Board is chaired by the Department Secretary. Among the powers and functions of the
PEZA is its ability to coordinate with the Department of Trade and Industry for policy and
program formulation and implementation. In strategizing and prioritizing the development of
special economic zones, the PEZA coordinates with the Department of Trade and
Industry.hanRoblesvirtualLawlibrary
The PEZA also administers its own funds and operates autonomously, with the PEZA Board
formulating and approving the PEZA’s annual budget. Appointments and other personnel
actions in the PEZA are also free from departmental interference, with the PEZA Board having
the exclusive and final authority to promote, transfer, assign and reassign officers of the
PEZA.chanRoblesvirtualLawlibrary
As an instrumentality of the national government, the PEZA is vested with special functions or
jurisdiction by law. Congress created the PEZA to operate, administer, manage and develop
special economic zones in the Philippines. Special economic zones are areas with highly
developed or which have the potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and financial centers.
Being an instrumentality of the national government, the PEZA cannot be taxed by local
government units.
Although a body corporate vested with some corporate powers, the PEZA is not a government-
owned or controlled corporation taxable for real property taxes.
The law created the PEZA’s charter. Under the Special Economic Zone Act of 1995, the PEZA
was established primarily to perform the governmental function of operating, administering,
managing, and developing special economic zones to attract investments and provide
opportunities for preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed with some corporate
powers. However, it was not organized as a stock or non-stock corporation. Nothing in the
PEZA’s charter provides that the PEZA’s capital is divided into shares. The PEZA also has no
members who shall share in the PEZA’s profits.
The PEZA does not compete with other economic zone authorities in the country. The
government may even subsidize the PEZA’s operations. Under Section 47 of the Special
Economic Zone Act of 1995, “any sum necessary to augment [the PEZA’s] capital outlay shall be
included in the General Appropriations Act to be treated as an equity of the national
government.”nRoblesvirtualLawlibrary
14
The PEZA, therefore, need not be economically viable. It is not a government-owned or
controlled corporation liable for real property taxes.
The PEZA’s predecessor, the EPZA, was declared non-profit in character with all its revenues
devoted for its development, improvement, and maintenance. Consistent with this non-profit
character, the EPZA was explicitly declared exempt from real property taxes under its charter.
Section 21 of Presidential Decree No. 66.
The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt the
PEZA from payment of real property taxes.
Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its
charter. A provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA is
unnecessary. The PEZA assumed the real property exemption of the EPZA under Presidential
Decree No. 66.
Real properties under the PEZA’s title are owned by the Republic of the Philippines
Under Section 234(a) of the Local Government Code, real properties owned by the Republic of
the Philippines are exempt from real property taxes.
Even the PEZA’s lands and buildings whose beneficial use have been granted to other persons
may not be taxed with real property taxes. The PEZA may only lease its lands and buildings to
PEZA-registered economic zone enterprises and entities. These PEZA-registered enterprises
and entities, which operate within economic zones, are not subject to real property
taxes. Under Section 24 of the Special Economic Zone Act of 1995, no taxes, whether local or
national, shall be imposed on all business establishments operating within the economic zones.

Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA “to evolve into the
PEZA in accordance with the guidelines and regulations set forth in an executive order issued
for this purpose.” President Ramos then issued Executive Order No. 282 in 1995, ordering the
PEZA to assume the EPZA’s powers, functions, and responsibilities under Presidential Decree
No. 66 not inconsistent with the Special Economic Zone Act of 1995.

The non-profit character of the EPZA under Presidential Decree No. 66 is not inconsistent with
any of the powers, functions, and responsibilities of the PEZA. The EPZA’s non-profit character,
including the EPZA’s exemption from real property taxes, must be deemed assumed by the
PEZA.

In addition, the Local Government Code exempting instrumentalities of the national

government from real property taxes was already in force when the PEZA’s charter was
enacted in 1995. It would have been redundant to provide for the PEZA’s exemption in its
charter considering that the PEZA is already exempt by virtue of Section 133(o) of the Local
Government Code.

As for the EPZA, Commonwealth Act No. 470 or the Assessment Law was in force when the
EPZA’s charter was enacted. Unlike the Local Government Code, Commonwealth Act No. 470
does not contain a provision specifically exempting instrumentalities of the national
government from payment of real property taxes. It was necessary to put an exempting
provision in the EPZA’s charter.

15
LGC SEC. 234. Exemptions from Real Property Tax and SEC. 133. Common Limitations on the
Taxing Powers of Local Government Units
G.R. No. 191109 July 18, 2012
REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY
(PRA),Petitioner,
vs.
CITY OF PARANAQUE, Respondent.
This is a petition for review on certiorari assailing the Order of the Regional Trial Court, Branch
195,Paranaque City (RTC), which ruled that petitioner Philippine Reclamation Authority (PRA) is
a government-owned and controlled corporation (GOCC), a taxable entity, and, therefore, not
exempt from payment of real property taxes.
The Public Estates Authority (PEA) is a government corporation created by virtue of P.D. No.
1084 toprovide a coordinated, economical and efficient reclamation of lands, and the
administration andoperation of lands belonging to, managed and/or operated by, the
government with the object of maximizing their utilization and hastening their development
consistent with public interest.
On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380
transforming PEA into PRA, which shall perform all the powers and functions of the PEA
relating to reclamation activities.
By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of
Manila Bay,including those located in Parañaque City. Parañaque City Treasurer issued
Warrants of Levy on PRA’s reclaimed properties based on the assessment for delinquent real
property for tax years 2001 and 2002.
PRA claimed that it is not a GOCC under the Administrative Code, nor is it a GOCC under
Section 16, Article XII of the 1987Constitution because it is not required to meet the test of
economic viability.
It is a government instrumentality vested with corporate powers and performing an essential
public service. It insists that it may not be classified as a non-stock corporation because it has
no members and it is not organized for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers as provided in Section 88 of the Corporation Code.Thus,
PRA insists that, as an incorporated instrumentality of the National Government, it is exempt
from payment of real property tax except when the beneficial use of the real property is
granted to a taxable person. PRA claims that based on Section 133(o) of the LGC, local
governments cannot tax the national government which delegate to local governments the
power to tax.
Issue:
Whether or not Philippine Reclamation Authority (PRA) is an incorporated instrumentality of
the national government and is, therefore, exempt from payment of real property tax under
sections 234(a) and 133(o) of Republic Act 7160?
Held:
Yes it is a Government Instrumentality.
In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock
corporation. It cannot be considered as a stock corporation because although it has a capital
stock divided into no par value shares as provided in Section 74 of P.D. No. 1084, it is not
authorized to distribute dividends, surplus allotments or profits to stockholders. PRA is a
government instrumentality vested with corporate powers and performing an essential public
service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code.
Being an incorporated government instrumentality, it is exempt from payment of real property
tax.
Many government instrumentalities are vested with corporate powers but they do not become
stock or non-stock corporations, which is a necessary condition before an agency
or instrumentality is deemed a GOCC. The fundamental provision above authorizes Congress to
create GOCCs through special charters on two conditions: 1) the GOCC must be established for
the common good; and 2) the GOCC must meet the test of economic viability. In this case, PRA
may have passed the first condition of common good but failed the second one - economic
viability. Undoubtedly, the purpose behind the creation of PRA was not for economic or
commercial activities.
Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by
PRA. On the other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts
PRA from paying realty taxes and protects it from the taxing powers of local government units.
Section 234(a) of the Local Government Code states that real property owned by the Republic
of the Philippines (the Republic) is exempt from real property tax unless the beneficial use
thereof has been granted to a taxable person.
16
Section 133 of the Local Government Code states that "unless otherwise provided" in the Code,
local governments cannot tax national government instrumentalities.

In this case, there is no proof that PRA granted the beneficial use of the subject reclaimed lands
to a taxable entity. There is no showing on record either that PRA leased the subject reclaimed
properties to a private taxable entity.

WHEREFORE, the petition is GRANTED. The Order of the Regional Trial Court, Branch 195,
Parañaque City, is REVERSED and SET ASIDE.

17