SC: LRTA is a govt instrumentality exercising corporate powers (GICP)

In 2000, SC promulgated a decision holding the GOCC can only be a stock or a non-stock corp. LRTA is neither
LRTA properties are considered patrimonial and is
subject to RPT SECOND DIVISION SC: As a GCIP, its properties are owned by the RP

In 2006. Supreme Court held in MIAA vs SC: The properties were use for public purpose
CA that MIAA is a govt instrumentality
hence exempt from tax [G.R. No. 221626. October 9, 2019.] SC: LRTA mandate and purpose is to
operate the LRT w/c affected the public
In 2007 LRT was assess by LG of QC for RPT deficiencies and its income is for maintenance

LRTA object LIGHT RAIL TRANSIT AUTHORITY, petitioner, vs. QUEZON

citing MIAA vs CITY, REPRESENTED BY THE CITY TREASURER AND THE CITY
CA and averred
that it is also a ASSESSOR, respondent. SC: When LGs invoke the power to tax on NG instrumentalities, such power is
GI like the MIAA construed strictly against LGs. 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,
QC: LRT is taxable based on previous ruling in 2000 article or activity is taxable is resolved against taxation.
DECISION
SC: Another rule is that a tax exemption is strictly construed against the SC: GCIP is exempt from RPT but the exemption shall not extend to
taxpayer claiming the exemption. However, when Congress grants an taxable private entities to whom the beneficial use of the government
exemption to a NG instrumentality from local taxation, such exemption is instrumentality's properties has been vested. The taxable private
construed liberally in favor of the national government instrumentality. entities are subject to real property tax, but not the government
LAZARO-JAVIER, J : p instrumentality they have dealt with, much less, the properties of the
government instrumentality subject of such beneficial use
Prefatory
The doctrine of precedents is fundamental to our legal system. It
provides certainty while permitting the orderly development of the law in
incremental steps. Stare decisis, however, is not a straitjacket which
condemns the law to stasis or a state of suspended animation and disbelief.
Where there is a change in the circumstances which fundamentally shifts the
parameters of the debate, especially the collective thinking of the Court
expressed in later decisions and the present social milieus on which our
decisions will greatly impact, we have to understand and give effect to
precedents in such new light.
The Case
This Petition for Review 1 seeks to nullify the following dispositions of
the Regional Trial Court, Branch 95, Quezon City, in Civil Case No. Q-11-
70303, entitled "Light Rail Transit Authority vs. Quezon City, represented by
the City Treasurer and the City Assessor " for Certiorari, Prohibition and
Injunction:
1. Â Decision 2 dated March 5, 2015, sustaining the realty taxes
imposed by the local government of Quezon City on the LRTA's
real properties.
2. Â Order dated November 3, 2015, denying the LRTA's motion for
reconsideration.
Antecedents
Pursuant to Executive Order No. 603 3 (EO 603) dated July 12, 1980,
the Light Rail Transit Authority (LRTA) was created primarily to construct,
operate, maintain, and/or lease the light rail transit system of the country.
For this purpose, the LRTA acquired real properties 4 and commenced its
operations in 1984. CAIHTE

On October 12, 2000, the Court rendered its decision in LRTA v.

Central Board of Assessment Appeals (CBOA) 5 involving the City of
Manila's tax assessment on the LRTA's real properties consisting of lands,
buildings, carriageways and passenger terminal stations, machinery, and
equipment which the City of Manila considered taxable under the Real
Property Tax C ode. The Court ruled that the LRTA's properties had already
been classified by law as patrimonial property subject to tax.
On October 15, 2007, the LRTA received several Statements of
Delinquency and Final Notices of Tax Delinquency, this time, from
respondent Quezon City. By letter 6 dated October 15, 2007, the LRTA
informed Quezon City that pursuant to the subsequent case of MIAA v.
Court of Appeals, 7 the LRTA is a government instrumentality, thus,
exempt from real property tax. 8
Through the Office of the City Treasurer, Quezon City issued warrants
of levy on the LRTA's properties on which realty taxes had not been paid.
On November 12, 2007, the LRTA again wrote Quezon City reiterating
the effect of MIAA v. Court of Appeals 9 on its status and tax-exemption
as a government instrumentality. Despite its continuous communication with
the LRTA, however, Quezon City did not stop sending notices to the former
for collection of realty taxes of Five Hundred Fifteen Million Two Hundred
Four Thousand Seven Hundred Sixty-Nine and Thirteen Centavos
(P515,204,769.13). 10
In December 2007, Quezon City auctioned the affected LRTA
properties. But for lack of any interested bidder, these properties were
instead sold to Quezon City pursuant to Sec. 263 of RA 7610, viz.: 11
Registered Location Tax Assessed Actual Use
Owner Declaration Value
LRTA Loyola D-056-09933 636,275,580.00 Commercial
Heights
LRTA Mariana D-061-07102 25,506,730.00 Commercial
LRTA Kaunlaran D-050-02656 281,163,250.00 Commercial
LRTA Kaunlaran D-050-02838 340,508,070.00 Commercial
LRTA Bagumbahay E-010-02906 203,751,440 Commercial
LRTA Bagumbuhay D-010-02867 33,460,930.00 Commercial
LRTA E. Rodriguez D-040-04992 420,598,970.00 Commercial
LRTA Mariana D-061-06701 212,350,740.00 Commercial
LRTA E. Rodriguez D-040-04802 340,260,790.00 Commercial
LRTA Valencia D-130-05857 102,410,250.00 Commercial
LRTA Loyola D-056-09527 110,550,190.00 Commercial
Heights
LRTA Loyola D-056-10467 147,668,500.00 Commercial
Heights
LRTA Marilag D-063-04730 279,948,100.00 Commercial
LRTA Valencia D-130-05856 200,072,650.00 Commercial
LRTA Mariana D-061-07103 314,349,440.00 Commercial
LRTA Kaunlaran D-050-02655 21,529,630.00 Commercial
On April 6, 2010, Quezon City again auctioned off another set of the
LRTA properties, 12 thus:
Tax Declaration Tax Liability Purchase
Price
E-050-0078 33,640.10 45,000.00
 E-040-01350 26,948.48 6,467.76
E-040-01433 40,568.74 16,800.00
E-40-01352 34,791.80 8,350.03
E-130-00148 6,131.10 4,800.00
E-050-00080 7,624.78 2,400.00
E-061-00403 95,602.45 -
E-050-00084 35,048.10 -
E-063-00088 197,625.90 -
Meantime, the LRTA's right of redemption expired on April 4, 2011. 13 It
thus filed a petition for certiorari, prohibition and injunction against Quezon
City before the Regional Trial Court, which was raffled to Branch 95 and
docketed as Civil Case No. Q-11-70303. DETACa

Invoking MIAA v. Court of Appeals , 14 the LRTA asserted anew that it

is a government instrumentality, hence, exempt from real property tax. 15
For its part, Quezon City countered that the LRTA is not a government
instrumentality but a government-owned and controlled corporation (GOCC).
Its activities are proprietary in nature and not purely governmental. It is
clothed with corporate status and powers, earns profit, and operates as an
ordinary private corporation. EO 603 does not exempt the LRTA from real
property taxes. The Local Government Code of 1991 has removed or
withdrawn the tax exemptions of GOCCs. Consistent with the decision in
LRTA v. CBOA , 16 the LRTA is thus a taxable entity. 17
The Trial Court's Ruling
By Decision dated March 5, 2015, the trial court dismissed the petition.
It held, among others, that the LRTA properties are taxable based on the
Local Government Code and the Constitution. It further ruled that the
taxability of the LRTA properties was already settled in LRTA v. CBOA . The
LRTA's reliance on MIAA v. CA was, therefore, allegedly misplaced.
The LRTA's motion for reconsideration was denied through Order dated
November 3, 2015. 18
The Present Petition
The LRTA now urges the Court to nullify the trial court's dispositions
regarding its liability for real property tax. It reiterates that it is not a GOCC
but a government instrumentality, hence, its properties are not taxable. The
decision in Mactan Cebu International Airport (MCIAA) v. City of Lapu-
Lapu 19 citing the 2006 MIAA case, superseded LRTA v. CBOA . Its
properties belong to the Republic of the Philippines and are intended for
public use, hence, exempt from real property taxes. 20
In its Comment, 21 Quezon City ripostes, in the main: a) the LRTA is not
a government instrumentality but a GOCC; b) its activities are proprietary
and not purely governmental; and c) it is profit earning and operating like a
private corporation. aDSIHc

Issues
1) Â Is the LRTA a GOCC or a government instrumentality; and
 2) Â Are the LRTA's properties subject to real property tax?
Ruling
The Local Government Code provides for the exercise by local
government units of the power to tax, its scope or limitations, and those who
are exempt from local taxation. On this score, Section 232 of the Code
recognizes the power of the local government units to tax real property not
otherwise exempt therefrom, viz.:
Section 232. Â Power to Levy Real Property Tax . — A
province or city or a municipality within the Metropolitan Manila Area
may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter
specifically exempted.
Section 234 of the Code further enumerates the properties exempt
from real property tax, viz.:
Section 234. Â Exemptions from Real Property Tax. — The
following are exempted from payment of the real property tax:
(a) Â 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;
(b) Â Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, non-profit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
(c) Â All machineries and equipment that are actually, directly and
exclusively used by local water districts and government owned
or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;
(d) Â All real property owned by duly registered cooperatives as
provided for under R.A. No. 6938; and
(e) Â Machinery and equipment used for pollution control and
environmental protection. ETHIDa

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 all government-owned
or -controlled corporations are hereby withdrawn upon the effectivity
of this Code.
Section 234 of the Local Government Code (LGC) has withdrawn the
previous real property tax exemptions granted to natural or juridical
persons, including government-owned or controlled corporations, except as
otherwise provided therein. The law ordains that only real properties owned
by the Republic of the Philippines or any of its political subdivisions are
exempt from real property tax.
The LRTA is not a government
owned and controlled
corporation (GOCC).
 The Administrative Code of 1987 defines a government owned and
controlled corporation (GOCC) in this wise:
(13) Â government-owned or controlled corporations refer 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
indirectly through its instrumentalities either wholly, or where
applicable as in the case of stock corporations to the extent of at
least 51% (fifty-one percent) of its capital stock.
cSEDTC

Indeed, an agency is a government-owned or controlled corporation

when it is organized as a stock or non-stock corporation. A stock corporation
is one that sources its capital through shares of stock and therefore has a
share capital or capital stock, not just capital, whose capital stock is divided
into shares, and who is authorized to distribute dividend to the holders of
such share. 22 A non-stock corporation, on the other hand, is one where no
part of its income is distributable as dividends to its members, trustees, or
officers. A non-stock corporation must have members. 23
Consequently, to be considered as a GOCC, an entity must either be
organized as a stock or non-stock corporation. Three (3) requisites must
concur for one to be classified as a stock corporation, viz.: (1) it has capital
stock, (2) the capital stock is divided into shares, and (3) it is authorized to
distribute dividends and allotments of surplus and profits to its stockholders.
As for non-stock corporations, they must have members and must not
distribute any part of their income to said members. 24
Section 15 of the LRTA's Charter 25 decrees:
Sec. 15. Â Capitalization. — The Authority shall have an
authorized capital of FIVE HUNDRED MILLION PESOS
(P500,000,000.00) which shall be fully subscribed by the Republic of
the Philippines and other government institutions, corporations,
instrumentalities, and agencies, whether national or local, within the
framework of their respective charters.
The LRTA has statutory capital — but not capital stock or share capital.
The wording of its capital structure is similar to that of the Manila
International Airport Authority (MIAA). Section 10 of the MIAA Charter
provides:
SECTION 10. Capital. — The capital of the Authority to be
contributed by the National Government shall be increased from Two
and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion
(P10,000,000.00) Pesos to consist of . . . (emphasis added)
Under their respective Charters, both the LRTA and the MIAA do not
have capital stock that is divided into shares. To repeat, 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
dividends x x x." The LRTA and the MIAA have capital but it is not a capital
stock or share capital, which is not divided into shares of stock. Neither of
them has stockholders nor voting shares. Hence, the LRTA — as the MIAA —
is not a stock corporation.SDAaTC
 The LRTA 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 the LRTA, this will not make the LRTA 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." The LRTA is
not organized for any of these purposes. As a public utility, it is organized to
operate the light rail transit system for public use.
In any case, having a GOCC status does not at once disqualify one from
real property tax exemption. Having a GOCC status simply means that the
GOCC must find a legal basis for claiming real property tax exemption other
than what was previously granted to it under the old real property tax laws
which Local Government Code has already repealed. It is in this light that the
LRTA's status as a government instrumentality assumes importance for the
purpose of claiming real property tax exemption. acEHCD

The LRTA is a government

instrumentality exercising corporate
powers
Is the LRTA a government instrumentality exempt from real property
tax?
Respondent maintains that the LRTA is not a government
instrumentality but per LRTA v. CBOA , one clothed with corporate status
and powers necessary in the furtherance of its proprietary objectives. It
operates much like any private corporation engaged in the mass transport
industry. Since it is engaged in a service-oriented commercial endeavor, its
carriageways and terminal stations are consequently patrimonial property
subject to tax.
A dispassionate closer reading of LRTA v. CBOA reveals what i t is
not. It never held at all, that having a corporate status and corporate powers
per se automatically disqualifies the entity from claiming real property tax
exemption. For corporate status and corporate powers came about in LRTA
v. CBOA simply to illustrate and reinforce the holding that LRTA's operation
is that of an ordinary business, which is to earn profit . Thus:
Though the creation of the LRTA was impelled by public service
— to provide mass transportation to alleviate the traffic and
transportation situation in Metro Manila — its operation
undeniably partakes of ordinary business. Petitioner is clothed
with corporate status and corporate powers in the furtherance of its
proprietary objectives. Indeed, it operates much like any private
corporation engaged in the mass transport industry. Given that
it is engaged in a service-oriented commercial endeavor, its
carriageways and terminal stations are patrimonial property subject
to tax, notwithstanding its claim of being a government-owned or
 controlled corporation. . . . These carriageways and terminal stations
serve a function different from that of the public roads. The former
are part and parcel of the light rail transit (LRT) system which, unlike
the latter, are not open to use by the general public. The
carriageways are accessible only to the LRT trains, while the
terminal stations have been built for the convenience of LRTA
itself and its customers who pay the required fare.
Basis of Assessment is Actual Use of Real Property
Under the Real Property Tax Code, real property is classified for
assessment purposes on the basis of actual use, which is defined as
"the purpose for which the property is principally or predominantly
utilized by the person in possession of the property.SDHTEC

Petitioner argues that it merely operates and maintains the LRT

system, and that the actual users of the carriageways and terminal
stations are the commuting public. It adds that the public-use
character of the LRT is not negated by the fact that revenue is
obtained from the latter's operations.
We do not agree. Unlike public roads which are open for
use by everyone, the LRT is accessible only to those who pay
the required fare. It is thus apparent that petitioner does not
exist solely for public service, and that the LRT carriageways
and terminal stations are not exclusively for public use.
Although petitioner is a public utility, it is nonetheless profit-
earning. It actually uses those carriageways and terminal stations in
its public utility business and earns money therefrom. (emphasis
added)
In fine, LRTA v. CBOA was decided against the LRTA because of the
conclusions of law then that the principal or predominant use of the LRTA
properties was for ordinary business, that is, an activity for earning money,
and as such, the LRTA was disqualified from real property tax exemption.
The ruling was not because LRTA had corporate status and corporate
powers, as these matters were used merely to prop up the foregoing
conclusions of law.
LRTA v. CBOA has to be understood now in light of the developments
brought about by the 2006 ruling in MIAA v. CA and 2015 case law of
MCIAA v. City of Lapu-Lapu , reiterating MIAA v. CA . The conclusions
reached in LRTA v. CBOA must also be considered in light of present-day
social milieu of great public impact from which we cannot isolate our
decision.AScHCD

Our inquiry begins with the status of LRTA as a government

instrumentality.
Subsection 10 (10) of the Administrative Code of 1987 defines an
"Instrumentality as 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." The Court had on several occasions clarified that the
legal vesture of corporate powers in a government instrumentality does not
negate its status as such.
Notably, what is defined in the Administrative Code of 1987 is an
"instrumentality." The category of an instrumentality with corporate
powers came into being by virtue of this Court's pronouncement in MIAA
v. Court of Appeals . Citing Section 2 (10) of the Administrative Code of
1987, the Court characterized the Manila International Airport Authority
(MIAA) as an instrumentality with corporate powers:
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. Section 2(10) of the
Introductory Provisions of the Administrative Code defines a
government "instrumentality" as follows:
SEC. 2. Â General Terms Defined. — x x x
(10) Â Instrumentality refers to 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
xxx
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 x x x Likewise, when
the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National
Government machinery although not integrated with the department
framework x x x
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 government-owned or controlled corporation x x x These
government instrumentalities are sometimes loosely called
government corporate entities. However, they are not government-
owned or controlled corporations in the strict sense as understood
under the Administrative Code, which is the governing law defining
the legal relationship and status of government entities.
AcICHD

This classification was eventually adopted in Executive Order No. 596

(EO 596) which was enacted into law on December 29, 2006. It
acknowledged the third classification of a government agency in addition to
GOCCs and instrumentalities, viz.: government instrumentalities vested with
corporate powers and named as "government corporate entities" (GCE). EO
596 includes GCEs within the jurisdiction of the Office of the Government
Corporate Counsel (OGCC). Section 1 of EO 596 states:
Section 1. Â The Office of the Government Corporate Counsel
(OGCC) shall be the principal law office of all GOCCs, except as may
 otherwise be provided by their respective charter or authorized by
the President, their subsidiaries, corporate offsprings, and
government acquired asset corporations. The OGCC shall likewise be
the principal law office of "government instrumentality vested with
corporate powers" or "government corporate entity," as defined by
the Supreme Court in the case of "MIAA vs. Court of Appeals,
City of Parañaque, et al. , " supra, notable examples of which are:
Manila International Airport Authority (MIAA), Mactan International
Airport Authority, the Philippine Ports Authority (PPA), Philippine
Deposit Insurance Corporation (PDIC), Metropolitan Water and
Sewerage Services (MWSS), Philippine Rice Research Institute (PRRI),
Laguna Lake.
Development Authority (LLDA), Fisheries Development
Authority (FDA), Bases Conversion and Development Authority
(BCDA), Cebu Port Authority (CPA), Cagayan de Oro Port Authority,
and San Fernando Port Authority.
In 2011, RA No. 10149, the GOCC Governance Act of 2011 was passed
into law adopting such new category under EO 596:
( n ) Government Instrumentalities with Corporate Powers
(GICP)/Government Corporate Entities (GCE) refer to instrumentalities
or agencies of the government, which are neither corporations nor
agencies integrated within the departmental framework, but vested
by law with special functions or jurisdiction, endowed with some if not
all corporate powers, administering special funds, and enjoying
operational autonomy usually through a charter including, but not
limited to, the following: the Manila International Airport
Authority (MIAA), the Philippine Ports Authority (PPA), the Philippine
Deposit Insurance Corporation (PDIC), the Metropolitan Waterworks
and Sewerage System (MWSS), the Laguna Lake Development
Authority (LLDA), the Philippine Fisheries Development Authority
(PFDA), the Bases Conversion and Development Authority (BCDA), the
Cebu Port Authority (CPA), the Cagayan de Oro Port Authority, the San
Fernando Port Authority, the Local Water Utilities Administration
(LWUA) and the Asian Productivity Organization (APO). TAIaHE

Thus, the classification of Government Instrumentalities with Corporate

Powers (GICP)/Government Corporate Entities is now officially recognized.
Examples of instrumentalities of the national government vested with
corporate powers are the Manila International Airport Authority, the
Philippine Fisheries Development Authority, the Government Service
Insurance System, and the Philippine Reclamation Authority. These entities
are government instrumentalities because each of them is not integrated
within the department framework and is vested with special functions to
carry out a declared policy of the national government. 26
An agency will be classified as a government instrumentality vested
with corporate powers when the following elements concur: a) it performs
governmental functions, and b) it enjoys operational autonomy. It does not
matter that the government instrumentality is endowed with corporate
powers.
The characterization of government instrumentality is not lost where
the government entity possesses corporate status. These are not polar
opposites. This is so especially when, despite the corporate status, it is really
the resources and reputation of the Republic for a paramount public purpose
that are at stake in the capitalization and operations of the government
entity.
Here, the LRTA bears the elemental characteristics of a government
instrumentality vested with corporate powers. Consider:
One. The vesture of its corporate powers is found in Article 2 of
Executive Order 603 otherwise known as "Creating a Light Rail Transit
Authority, Vesting the same with Authority to Construct and Operate the
Light Rail Transit (LRT) project and providing funds therefor," viz.:
ARTICLE 2
CORPORATE POWERS
SEC. 4. General Powers. — The Authority, through the Board of
Directors, may undertake such actions as are expedient for or
conducive to the attainment of the purposes and objectives of the
Authority, or of any purpose reasonably incidental to or consequential
upon any of these purposes. x x x. cDHAES

Two. The LRTA performs governmental functions. It is primarily

responsible for the construction, operation, maintenance, and/or lease of
light rail transit systems in the country, giving due regard to the reasonable
requirements of the public transportation system of the country. 27 As
explained in more detail below, the LRTA's functions are less commercial
than governmental, and more for public use and public welfare than for
profit-oriented services.
Three. The LRTA also enjoys operational autonomy, as it exists by
virtue of a Charter, and its powers and functions are vested in and exercised
by its Board of Directors. 28
The next inquiry hinges on the tax-exempt status of government
instrumentalities vested with corporate powers.
Respondent relies on LRTA v. CBOA case in arguing that the LRTA's
real properties are not tax exempt. We should however tread carefully when
reading LRTA v. CBOA . The Court has already clarified the tax-exempt
status of government instrumentalities vested with corporate powers
in the following cases:
In MIAA v. Court of Appeals , 29 the Court pronounced that MIAA is a
government instrumentality vested with corporate powers to perform
efficiently its governmental functions. A government instrumentality like
MIAA falls under Section 133 (o) of the Local Government Code which
recognizes the basic principle that local governments cannot tax the national
government. ASEcHI

I n Philippine Fisheries Development Authority (PFDA) v. Court

of Appeals, 30 the Court held that PFDA is an instrumentality of the national
government, hence, exempt from real property tax, albeit the exemption
does not extend to such portions of the property, the beneficial use of which
are vested in private entities. In any event, when local governments invoke
the power to tax on national government instrumentalities, such power is
construed strictly against local governments.
I n MIAA v. City of Pasay , 31 the Court reiterated that MIAA is a
government instrumentality exempt from any kind of tax from the local
governments.
I n Government Service Insurance System v. City Treasurer of
the City of Manila 32 the Court ruled that GSIS as an instrumentality of the
national government is itself not liable to pay real estate taxes assessed by
the City of Manila against its Katigbak and Concepcion-Arroceros properties.
The liability devolves on the taxable beneficial user of these properties, but
not upon GSIS and any of its properties though the subject of transactions.
Consequently, the Katigbak property cannot be subject to a public auction
sale, notwithstanding the realty tax delinquency assessed on this property.
This means that the City of Manila may satisfy its tax claim by assessing the
taxable beneficial user of the Katigbak property and, in case of nonpayment,
by execution, but through means other than the sale at public auction of the
leased property of GSIS. 33
I n City of Lapu-Lapu v. Phil. Economic Zone Authority, (PEZA) ,
34the Court held that PEZA is an instrumentality of the national government.
Further, the lands owned by the PEZA are real properties owned by the
Republic of the Philippines itself. The City of Lapu-Lapu and the Province of
Bataan therefore, cannot collect real property taxes from the PEZA. ITAaHc

I n Mactan-Cebu International Airport Authority (MCIAA) v. City

of Lapu-Lapu and Pacaldo, 35 the Court reiterated that MCIAA like MIAA is
an instrumentality of the government; thus, its properties which are actually,
solely, and exclusively used for public purposes, consisting of the airport
terminal building, airfield, runway, taxiway and the lots on which they are
situated, are not subject to real property tax and respondent City was not
justified in collecting taxes from the MCIAA on these properties.
In the fairly recent case of Metropolitan Waterworks and
Sewerage System v. Local Government of Quezon , 36 the Court
stressed anew that a government instrumentality exercising corporate
powers is not liable for real property taxes on its properties unless it is
alleged and proven that the beneficial use of its properties has been
extended to a taxable person.
In sum, a government instrumentality though vested with
corporate powers are exempt from real property tax, but the exemption
shall not extend to taxable private entities to whom the beneficial use of the
government instrumentality's properties has been vested. The taxable
private entities are subject to real property tax, but not the government
instrumentality they have dealt with, much less, the properties of
the government instrumentality subject of such beneficial use.
Government entities falling under this category are exempt from real
property tax. The reason for this exemption is found in Subsection 133 (o) of
the Code, viz.:
SEC. 133. Â 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:
xxx xxx xxx
(o) Â Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and local government
units.
As eruditely explained in MIAA v. CA :
Section 133(o) recognizes the basic principle that local
governments cannot tax the national government, which historically
merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power
"subject to such guidelines and limitations as the Congress may
provide."CHTAIc

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.
Another rule is that a tax exemption is strictly construed
against the taxpayer claiming the exemption. However, when
Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed
liberally in favor of the national government instrumentality. As this
Court declared in Maceda v. Macaraig, Jr.: 37
The reason for the rule does not apply in the case of
exemptions running to the benefit of the government
itself or its agencies. In such case the practical effect of
an exemption is merely to reduce the amount of money
that has to be handled by government in the course of its
operations. For these reasons, provisions granting
exemptions to government agencies may be construed
liberally, in favor of non-tax-liability of such agencies.
There is, moreover, no point in national and local governments
taxing each other, unless a sound and compelling policy requires
such transfer of public funds from one government pocket to another.
There is also no reason for local governments to tax national
government instrumentalities for rendering essential public services
to inhabitants of local governments. The only exception is when the
legislature clearly intended to tax government instrumentalities for
the delivery of essential public services for sound and compelling
policy considerations. There must be express language in the law
empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved
against local governments. EATCcI
 Thus, Section 133 of the Local Government Code states that
"unless otherwise provided" in the Code, local governments cannot
tax national government instrumentalities. As this Court held in Basco
v. Philippine Amusements and Gaming Corporation: 38
The states have no power by taxation or otherwise,
to retard, impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to
carry into execution the powers vested in the federal
government. (MC Culloch v. Maryland , 4 Wheat 316, 4 L
Ed. 579)
This doctrine emanates from the "supremacy" of the National
Government over local governments.
"Justice Holmes, speaking for the Supreme Court,
made reference to the entire absence of power on the
part of the States to touch, in that way (taxation) at least,
the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state
or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them."
(citations omitted)
Otherwise, mere creatures of the State can defeat
National policies thru extermination of what local
authorities may perceive to be undesirable activities or
enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42). DHITCc

The power to tax which was called by Justice

Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has
the inherent power to wield it.
The LRTA operations and properties
of public dominion are devoted to
public use and public welfare, hence,
are owned by the Republic of the
Philippines, and for legal and socially
significant reasons, are exempt from
real property taxes and the means to
collect such taxes.
The analysis provided by the En Banc decision in MIAA v. CA fully
demonstrates that LRTA is not engaged in a profit-earning business like a
private corporation. LRTA v. CBOA held that LRTA was engaged in an
ordinary business because it was charging fees for the use of its properties.
This reasoning no longer holds water. We adopt in full the disquisition of the
En Banc in MIAA v. CA :
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 operation by the government of a tollway does not change
the character of the road as one for public use. Someone must pay for
the maintenance of the road, either the public indirectly through the
taxes they pay the government, or only those among the public who
actually use the road through the toll fees they pay upon using the
road. The tollway system is even a more efficient and equitable
manner of taxing the public for the maintenance of public roads.
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." Even if the government collects toll
fees, the road is still "intended for public use" if anyone can use the
road under the same terms and conditions as the rest of the public.
The charging of fees, the limitation on the kind of vehicles that can
use the road, the speed restrictions and other conditions for the use
of the road do not affect the public character of the road.
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 the public who actually use a public facility instead of taxing
all the public including those who never use the particular public
facility. A user's tax is more equitable — a principle of taxation
mandated in the 1987 Constitution. cEaSHC

Verily, MIAA v. CA relevantly addresses the present social milieu

which the provision of public transportation plays in the lives of our people.
Indeed, with so much public expenses to take care of, the government
cannot be left alone to fully fund all public services which are essential to the
viability of our communities, most especially our means of public
transportation. Hence, the mere fact that consumers must pay all, or in the
case of the operations of our light rail transit, some of the expenses, should
not detract from the nature of the service the government entity offers or
the characterization of all the infrastructure which the operations require.
To be sure, the LRTA and its properties are tasked to establish the light
rail transit in the country. To pursue this mandate and purpose, the LRTA
pioneered the construction of light rail transit infrastructure, which was
financed through foreign loans. The revenues from the LRTA operations were
designed to pay for the loans incurred for its construction. The LRTA
operations were intended as a public utility rather than as a profit-making
mechanism. 39 The income which the LRTA generates is being used for its
operations, especially the maintenance of rail tracks and trains. Section 2 of
EO 603 provides for the re-capitalization of excess revenues and for such
other purposes that will enhance the LRTA's mandate and purpose:
The Authority shall conduct its business, according to prudent
commercial principles and shall ensure, as far as possible, that its
 revenues for any given year are, at least sufficient to meet its
expenditures. Any excess of revenues over expenditure in any fiscal
year may be applied by the Authority in any way consistent with this
Order, including such provisions for the renewal of capital assets and
the repayment of loans, as the Authority may consider prudent. CTIEac

Based on an independent 2008-2009 field survey report, the LRTA

income barely covered costs for operating expenses. The operating profit
from the operation of Lines 1 and 2 was in a deficit. Reasons for plus net
income in certain years were due to foreign exchange gain and infusion of
subsidies from the government. 40
As both a matter of social data and acceptable legal reasoning, it is
erroneous to conclude that to date, the LRTA has been engaged in profit-
making business. More than ever, its gargantuan tasks are to establish and
operate a viable public transportation system via the light rail trains to
address the demands of the riding public and to alleviate the worsening
traffic and transportation situation at least in Metro Manila. 41
Given the mandate and purpose of the LRTA, it stands to reason that
the LRTA's railroads, carriageways, terminal stations, and the lots on which
they are found and/or constructed are properties of public dominion intended
for public use. As such, they are exempt from real property tax under
Section 234 (a) of the Local Government Code.
City of Lapu-Lapu v. Phil. Economic Zone Authority 42 teaches:
Properties of public dominion are outside the commerce of man.
These properties are exempt from "levy, encumbrance or disposition
through public or private sale. As this court explained in
Manila International Airport Authority :
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. SaCIDT

On the other hand, all other properties of the state that are not
intended for public use or are not intended for some public service or
for the development of the national wealth are patrimonial properties.
Article 421 of the Civil Code of the Philippines provides:
Art. 421. Â All other property of the State, which is not
of the character stated in the preceding article, is
patrimonial property.
Patrimonial properties are also properties of the state, but the
state may dispose of its patrimonial property similar to private
persons disposing of their property. Patrimonial properties are within
the commerce of man and are susceptible to prescription, unless
otherwise provided.
MIAA v. CA identifies the locus of ownership of properties of public
dominion for public use — the Republic of the Philippines. If any of these
properties are titled in the name of specific government entities, the latter
only hold the legal title for the ultimate benefit of the Republic and the
sovereignty.
The light rail transit system is one of the major means of transportation
in Metro Manila. The bulk of public commuters takes the light rail transit to
go to and from their residences and places of work and other places of social
interaction.cHECAS

The light rail transit passes along several cities and municipalities.
There are two (2) LRT lines, the green and blue lines. The Light Rail Transit
System Line No. 1 consists of the 15km elevated railway system servicing
the Taft Avenue-Rizal Avenue route between Baclaran, Pasay City and the
Bonifacio Monument in the City of Caloocan. The Megatren, more popularly
known by its generic name Line 2, is a 13.8km mass transit line that
traverses five (5) cities in Metro Manila, namely Pasig, Marikina, Quezon City,
San Juan, and Manila, along the major thoroughfares of Marcos Highway,
Aurora Boulevard, Ramon Magsaysay Boulevard, Legarda, and Recto
Avenue. 43
Undoubtedly, the light rail transit performs a crucial role in the lives of
the people in Metro Manila. And the fact that by necessary implication, it has
to pass through several local government units, the protection accorded to
properties of public dominion for public use must be extended to the LRTA
and its properties. Taking some or a portion of the railroads, railways,
carriageways, and terminal stations will literally hamper the operation of the
light rail transit. Trains run on the rail tracks which are fastened to a
concrete foundation resting on a prepared subsurface. 44 Like an airport, the
light rail transit has a terminal commonly known as the LRT station. It is a
hub where passengers converge to buy train tickets and access the train
facilities. 45 It is also where the trains regularly stop to load or unload
passengers. 46 These properties are essential for the passenger transport
and continued operation of the light rail transit, without which this massive
transportation system will be paralyzed.
The fact that the LRTA may have entered into transactions with, short
of alienating them, to private parties in relation to the establishment,
operation, maintenance, and viability of a light rail transit in the country,
does not detract from the characterization of the LRTA's properties as
properties of public dominion for public use or public service. What is
important is the role, nexus, and relevance that these properties play in the
public use or public service purposes of the LRTA. AHDacC

ACCORDINGLY, the Court GRANTS the petition and NULLIFIES the

Decision dated March 5, 2015 and Resolution dated November 3, 2015 of
the Regional Trial Court, Branch 95, Quezon City, in Civil Case No. Q-11-
70303.
The Court DECLARES that:
1. Â The Light Rail Transit Authority (LRTA) and its properties utilized
in relation to the establishment, operation, maintenance, and
viability of the light rail transit in the country are EXEMPT from
real property taxes, among them, those imposed by the local
 government of Quezon City.
2. Â All real property tax assessments, as well as final notices of real
property tax delinquencies issued by the Quezon City
government on the Light Rail Transit Authority and its properties
are VOID.
3. Â The December 2007 and April 6, 2010 sales at public auction of
the properties of the Light Rail Transit Authority, the forfeiture
and purchase of these properties by the local government of
Quezon City, and the corresponding Certificates of Sale of
Delinquent Property issued to the local government of Quezon
City are VOID.
4. Â The local government of Quezon City may assess and collect
real property taxes only from those private parties, if any, to
whom the Light Rail Transit Authority may have leased its real
property for use by private parties for their private purpose. IDSEAH

SO ORDERED.
Carpio, Caguioa, J.C. Reyes, Jr. and Zalameda, concur.
Â
Footnotes

1. Rollo , pp. 3-22; under Rule 45 of the Revised Rules of Court.

2. Id. at 27-34.

3. Creating a Light Rail Transit Authority, Vesting the Same with Authority to
Construct and Operate the Light Rail Transit (LRT) Project and Providing
Funds Therefor.

4. Id. at 4-5.

5. 396 Phil. 860, 864 (2000).

6. Rollo , p. 52.

7. 528 Phil. 181, 245-246 (2006).

8. Rollo , pp. 5-7, 52.

9. Supra note 7.

10. Rollo , pp. 5-7.

11. Id.

12. Id.

13. Id.

14. Supra note 7.

15. Rollo , pp. 5-7.

16. Supra note 5.

17. Rollo , pp. 102-108.

18. Id. at 35-36.

19. 759 Phil. 296, 307-308 (2015); citing MIAA v. Court of Appeals, 528 Phil. 181
(2006).

20. Rollo , pp. 10-17.

21. Id. at 102-108.

22. Sec. 3, Corporation Code, Batas Pambansa Blg. 68.

23. Sec. 87, Corporation Code, Batas Pambansa Blg. 68.

24. Philippine Fisheries Development Authority v. Court of Appeals, 555 Phil. 661,
668 (2007).

25. EO 603.

26. City of Lapu-Lapu v. Phil. Economic Zone Authority, 748 Phil. 473, 541 (2014).

27. Sec. 2, Art. 1, EO 603.

28. Sec. 3, Art. 1, EO 603.

29. Supra note 7.

30. Supra note 24.

31. 602 Phil. 160, 209 (2009).

32. 623 Phil. 964, 982 (2009).

33. Id.

34. Supra note 26.

35. Supra note 19.

36. G.R. No. 194388, November 7, 2018.

37. 295 Phil. 252, 290 (1991).

38. 274 Phil. 323, 339-340 (1991).

39. http://www.lrta.gov.ph/index.php/history.

40. https://www2.jica.go.jp/en/evaluation/pdf/2008_PH-P171_4.pdf.

41. http://www.lrta.gov.ph.

42. G.R. Nos. 184203 & 187583, [November 26, 2014], 748 PHIL. 473-568.

43. http://www.lrta.gov.ph/index.php/railway-operations.
44. http://www.railway-technical.com/.

45. http://www.railway-technical.com/books-papers-articles/railway-stations-pc-fs-
2012.pdf.

46. https://www.brainkart.com/article/Purpose-of-a-Railway-Station_4342/.