Republic of the Philippines


CBAA CASE NO. M-21 -versus-



Respondents-Appellees. x- – – – – – – – – – – – – – – – – – – – – – – – – – – – – x


Before us is the motion for reconsideration dated September 14, 2007

filed by petitioner-appellant Philippine Ports Authority (PPA), seeking a review

of our Decision dated July 16, 2007, the dispositive portion is hereinbelow

reproduced, which copy allegedly received by PPA’s head office legal services

department on September 4, 2007, THUS:

“WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit. Accordingly, the Resolution of the Local Board of Assessment Appeals of General Santos City becomes final and executory.”

On the other hand, respondent-appellee, City Treasurer of General

Santos City filed an opposition to the motion for reconsideration on October 2,

2007. All other facts are stated in our Decision.

Petitioner-Appellant’s grounds for reconsideration are:

1. The Honorable Board erred in holding that the real properties under the administration of petitioner-appellant are not part of public dominion and are therefore subject to real property taxes.

2. The Honorable Board erred in ruling that the Republic of the Philippines is not an indispensible (sic) party to the suit as the properties under consideration are owned by the petitioner-appellant being a government-owned and controlled corporation and therefore not exempt from real property tax.

3. The Honorable Board erred in holding that petitioner-appellant, being the actual user of the land, shall be liable for real property tax.

The grounds relied upon are meritorious.

It is truly timely to reexamine the finding of this Board in the light of the

Court of Tax Appeals’ Decision in the case of Philippine Ports Authority, Davao

vs. Central Board of Assessment Appeals,, CTA EB Case No. 183 (CBAA

Case No. M-20), July 30, 2007, the Court of Appeals’ Resolution in this case of

Philippine Fisheries Development Authority, Zamboanga City, vs. Central Board

of Assessment Appeals, CA-G.R. SP No. 73522 (CBAA Case No. M-15),

October 11, 2007, granting petitioner’s Motion for Reconsideration and setting

aside its Decision dated May 31, 2007, denying the petition of PFDA for lack of

merit and the Supreme Court’s Decision in the Manila International Airport

Authority (MIAA) v. Court of Appeals, City of Parañaque, City Mayor of

Parañaque, Sangguniang Panglungsod of Parañaque, City Assessor of

Parañaque, and City Treasurer of Parañaque, G.R. No. 155650, July 20, 2006,

notwithstanding, a dissent of Justice Dante O Tinga.

PPA: An Instrumentality of the National Government

In the first case, the Court of Tax Appeals en banc ruled that “PPA, akin

to MIAA, is not a government-owned or controlled corporation, but an

instrumentality of the National Government.

“Pursuant to the aforecited Supreme Court decision, MIAA’s Airport

Lands and Buildings are exempt from real estate tax imposed by local

governments since it is not a government-owned or controlled corporation, but

an instrumentality of the National Government. A government-owned or

controlled corporation is an agency organized as a stock or a non-stock

corporation. While an instrumentality refers to any agency of the National

Government that is not integrated within the department framework, but vested

with special functions or jurisdiction by law, endowed with some, if not all

corporate powers, administering special funds, and enjoying operation

autonomy, usually through a charter.

“In the same manner, PPA is not a government-owned or controlled

corporation, but an instrumentality of the National Government, as categorically

pronounced by the Supreme Court in the MIAA case. PPA is not organized as a

stock or a non-stock corporation. It is not organized as a stock corporation

since it has no capital stock divided into shares. PPA has no stockholders or

voting shares. Section 10 of P.D. No. 857, otherwise known as the Revised

Charter of the Philippine Ports Authority, provides:

“SECTION 10. Capital. a) The authorized capital of the Authority shall be three billion pesos. b) The initial paid in capital shall consist of:

(i) The value of assets (including port facilities, quays, wharves, and equipment) and such other properties, movable or immovable as may be contributed by the Government or transferred by the Government or any of its agencies as valued at the date of such contribution or transfer and after deducting or taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties.

(ii) The initial cash appropriation of P2 million out of the funds of the National Treasury and such

(iii) Further sums, including working capital, as may be contributed by the Government.

“Clearly, under its Charter, PPA does not have capital stock that is

divided into shares.

“PPA is also not a non-stock corporation. Section 87 and 88 of the

Corporation define a non-stock corporation as one organized for charitable,

religious, educational, professional, cultural, recreational, fraternal, literary,

scientific, social, civil service, or similar purposes, like trade, industry,

agriculture and like chambers, no part of its income is distributable as dividends

to its members, trustees or officers. PPA, is a public utility, organized to

implement an integrated program for the planning, development, financing, and

operation of Ports or Port Districts for the entire country (Section 2 of P.D. No.

857). It has no members and no trustees, only board of directors (Section 7 of

P.D. No. 857), officials and employees who are to be selected and appointed

on the basis of merit and fitness consistent with the Civil Service rules and

regulations (Section 8 of P.D. No. 857). Thus, it is clear that PPA is not a non-

stock corporation.”

PPA Properties are of Public Dominion

The Makar Wharf, Lands and its Buildings, like MIAA’s Airport Lands and

Buildings, are Properties of Public Dominion.

“Pursuant further to the MIAA case, the Republic owns the airport lands

and buildings of MIAA since they are properties of public dominion under Article

420 of the Civil Code. The collection of terminal fees and other charges from

the public does not remove the character of said properties from being

properties for public use, as those fees partake of the nature of user’s tax.

Similarly, the Makar Wharf, Lands and its Buildings are properties of

public dominion pursuant to Article 420 of the Civil Code, notwithstanding that

PPA also collects fees from the public who actually used said properties. Being

properties of public dominion, the Makar Wharf, Lands, and its Buildings

indisputably belong to the State of the Republic of the Philippines.

“The Transfer of Assets And/Or Liabilities to PPA, Like in the Case of

MIAA, is not a transfer of Beneficial Ownership.

“Accordingly, pursuant to the MIAA case, the Supreme Court declared

that the transfer of the airport lands and buildings from the Bureau of Air

Transportation (“BAT”) to MIAA was not meant to transfer the beneficial

ownership, but merely for the purpose of reorganizing a division in the BAT into

a separate autonomous body.

“In the same vein, the transfer of the assets and liabilities of the Bureau

of Customs, Bureau of Public Works and other agencies of the government to

PPA was not a transfer of the beneficial ownership of those assets and

liabilities, but for the purpose of promoting the growth of regional port bodies

that are responsive to the needs of their individual localities (Last phrase of the

1st Whereas Clause, P.D. 857) in order to attain the port’s fuller utilization and

development as a spur of regional growth (3rd Whereas Clause, P.D. No. 857).

The Republic remains the beneficial owner of PPA’s properties. The PPA itself

is owned solely by the Republic and no party claims any ownership right over

PPA’s properties adverse to the Republic.

Except Leased to Taxable Person Real Property Owned by the Republic is Not Taxable

In the second case, the Supreme Court en banc in the case of Manila

International Airport Authority held, THUS:

“Section 234(a) of the Local Government Code exempts from real estate

tax any “real property owned by the Republic of the Philippines.” Section 234(a)


SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax:

(a) 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;

x x x. (Emphasis originally supplied)

“This exemption should be read in relation with Section 133(o) of the

same Code, which prohibits local governments from imposing

“[t]axes, fees or charges of any kind on the National Government, its agencies

and instrumentalities x x x.” The real properties owned by the Republic are titled

either in the name of the Republic itself or in the name of agencies or

instrumentalities of the National Government. The Administrative Code allows

real property owned by the Republic to be titled in the name of agencies or

instrumentalities of the national government. Such real properties remained

owned by the Republic and continue to be exempt from real estate tax.

It further said: “the Republic may grant the beneficial use of its real

property to an agency or instrumentality of the national government. This

happens when title of the real property is transferred to an agency or

instrumentality even as the Republic remains the owner of the real property.

Such arrangement does not result in the loss of the tax real property owned by

the Republic loses its tax exemption only if the “beneficial use thereof has been

granted, for consideration or otherwise, to a taxable person.” PPA, as a

government instrumentality, is not a taxable person under Section 133(o) of the

Local Government Code. Thus, even if we assume that the Republic has

granted to PPA the beneficial use of the Port Lands and Buildings, such fact

does not make these real properties subject to real estate tax.”

However, portions of the Port Lands and Buildings that PPA leases to

private entities are not exempt from real estate tax. For example, the land are

and the building occupied by warehouses that PPA leases to private

corporation is subject to real estate tax. In such a case, PPA has granted the

beneficial use of such land area for a consideration to a taxable person and

therefore such land area is subject to real estate tax. In Lung Center of the

Philippines v. Quezon City, the High Court ruled:

“Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.”1

This Board believes, as succinctly explained both by the Supreme Court

en banc in the case of the Manila International Airport Authority, and the Court

of Tax Appeals en banc in the case of PPA vs. Central Board of Assessment

Appeals,, the rulings effectively cleared various issues haunting local

governments viz airport and seaport authorities.

The Highest Court has clearly defined WHAT THE LAW IS. It is doubly

the province and the duty of judicial department to say what the law is. Those

who apply the rule to particular cases must of necessity expound and interpret

that rule. If two or more laws are seemingly in conflict with each other, the

courts must decide on the operation of each.

As it is now applying the principle of stare decisis, there would be no

substantial distinction between the properties held by the PPA and the MIAA.

These entities are in the business of operating facilities that promote public


1 G.R. No. 144104, 29 June 2004, 433 SCRA 119, 138.

Stare decisis emanates from Article 8 of the Civil Code which we quote:

“Art. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines.”

The doctrine of stare decisis embodies the legal maxim that a principle or

rule of law which has been established by the decision of a court of controlling

jurisdiction will be followed in other case involving a similar situation. It is

founded on the necessity for securing certainty and stability in the law.

Such decisions “assume the same authority as the statute itself and, until

authoritatively abandoned, necessarily become, to the extent that they are

applicable, the criteria which must control the actuations not only those called

upon to abide thereby but also of those in duty bound to enforce obedience

thereto.” (Justice Davide’s dissent in the case of Kilosbayan vs. Morato, G.R.

No. 118910, July 17, 1995 as cited in 1996 Supplement: Constitutional

Structure and Powers of Government Cases, Joaquin G. Bernas, S.J. p. 312)

This Board, therefore, enjoins adherence to judicial precedents. It

requires us to follow the rule just established. That decision becomes a judicial

precedent to be followed in subsequent cases by all courts in the land. The

doctrine of stare decisis is based on the principle that once a question of law

has been examined and decided. It should be deemed settled and closed to

further argument. (Arturo M. Tolentino, Commentaries and Jurisprudence on

the Civil Code of the Philippines, Vol. I, 1990, pp. 37,38) (Emphasis Ours)

WHEREFORE, premises considered, the instant appeal is PARTLY

GRANTED. Our Decision dated July 16, 2007 and the Resolution of the LBAA

General Santos City dated July 9, 2005 is hereby MODIFIED and PARTLY SET

ASIDE. We, therefore, hold the real property of petitioner-appellant Philippine

Ports Authority located at Makar Wharf, General Santos City EXEMPT from the

real estate tax except those leased to a ‘taxable person’. Accordingly, the city

assessor is DIRECTED to issue new sets of tax declarations exempting these

real properties from real estate tax, imposing real property tax only to those

leased to taxable persons.


Manila, Philippines, December 10, 2007.