PHILIPPINE FISHERIES G.R. No. 150301
- versus - PUNO, C.J., Chairperson,
THE HONORABLE COURT OF AZCUNA,
APPEALS, THE HONORABLE
REGIONAL TRIAL COURT, GARCIA, JJ.
BRANCH 169, MALABON, METRO
HON. FLORANTE M. BARREDO,
in his official capacity as Municipal
Treasurer of Navotas, Metro
and HON. NORBERTO E. AZARCON, October 2, 2007
in his capacity as Chairman of the
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This is a petition for review of
the decision and resolution of the Court of Appeals (CA), dated
The facts appear as follows:
The controversy arose when respondent
assessed taxes had remained unpaid despite the demands made by the municipality
which prompted it, through Municipal Treasurer Florante M. Barredo, to give
notice to petitioner on October 29, 1990 that the NFPC will be sold at public
auction on November 30, 1990 in order that the municipality will be able to
collect on petitioners delinquent realty taxes which, as of June 30, 1990,
P23,128,304.51, inclusive of penalties.
sought the deferment of the auction sale claiming that the NFPC is owned by the
Republic of the
In view of the refusal of PFDA to pay
the assessed realty taxes, the matter was referred to the Department of Finance
This Department takes cognizance of the allegations of [the Office of the Mayor of Navotas] that PFDA has leased its properties to beneficial users, such as businessmen, private persons and entities who are taxable persons. For this reason, it is imperative that the Municipality should conduct an ocular inspection on the real properties (land and building owned by PFDA) in order to identify the properties actually leased and the taxable persons enjoying the beneficial use thereof. The ocular inspection is necessary for reason that the real properties, the use of which has been granted to taxable persons, for consideration or otherwise, are subject to the payment of real property taxes which must be paid by the grantees pursuant to the provisions of the Real Property Tax Code, as amended.
Therefore, it is imperative to determine who the actual users of the properties concerned [are]. If used by a non-taxable person other than PFDA itself, it remains to be non-taxable. Otherwise, if said properties are being used by taxable persons, same becomes taxable properties. For this purpose, it is also incumbent upon PFDA to furnish the Municipality copies of the deed of lease or other relevant documents showing the leased properties and their beneficial users for proper assessment.
Notwithstanding the DOFs
instruction, respondent Municipality proceeded to publish the notice of sale of
NFPC in the
Respondent Municipality, on the other hand, insisted that: 1) the real properties within NFPC are owned entirely by petitioner which, despite the opportunity given, had failed to submit proof to the Municipal Assessor that the properties are indeed owned by the Republic of the Philippines; 2) if the properties in question really belong to the government, then the complaint should have been instituted in the name of the Republic of the Philippines, represented by the Office of the Solicitor General; and 3) the complaint is fatally defective because of non-compliance with a condition precedent, which is, payment of the disputed tax assessment under protest.
plaintiff [petitioner] failed to present convincing evidence to support its
claim of realty tax exemption and ownership of the property by the Republic of
the Philippines as mandated by Sec. 9 of P.D. 464. Notwithstanding receipt of
the notices of tax assessments from the defendants [public respondent], the
plaintiff did not avail of the remedies under the law by raising on appeal the
said tax assessments to the Local Board of Assessment Appeals, then to the
Central Board of Assessment Appeals and ultimately, to the Court of Tax
Appeals. Instead, the plaintiff continuously ignored the notices of tax
assessments on the pretext that the properties inside the NFPC are exempt from
payment of real estate taxes as they are owned by the Republic of the
The plaintiff failed in this regard, hence the Municipality, exercising its power to assess and collect taxes on real properties within its jurisdiction, did the right thing, that is, to schedule the NFPC properties for public auction. Furthermore, while the plaintiff is insisting that the NFPC properties are owned by the Republic of the Philippines, and is therefore exempt from payment of real estate taxes, yet it admitted that there are those lessees who leased portion[s] of the complex, and [it was] even willing to submit [a] list of these lessees for proper tax assessments.
. . .
WHEREFORE, premises considered,
judgment is hereby rendered in favor of the defendant [public respondent
1. The DISMISSAL of this case;
2. The preliminary injunction previously issued in this case DISSOLVED; and
The plaintiff to pay the defendant [public respondent]
Municipality the sum of
P13,767.00 as actual damages.
CA affirmed the ruling of the RTC in a Decision dated
The thrust of appellant PFDAs arguments has shoved to the fore the fact that the 67-hectare land on which the NFPC Navotas Fishing Port Complex stands was reclaimed from the sea which explains why it was bounded on the North by the Manila Bay, on the East by Roxas Boulevard, on the South by the Manila Bay and on the West, by the breakwater. Even the Municipalitys counsel, Atty. Victorino Landas; Assessor, Arturo Coronel; and Treasurer, Florante Barredo have admitted that much, as pointed out by PFDA. Such being the origin of the land, its ownership by the State as property of public dominion can hardly be disputed.
The reclaimed land; breakwaters; piers; wharves and quaywalls; and, fish market building forming part of the Navotas Fish Port were furthermore certified by the Undersecretary of Public Works and Highways as belonging to the national government since they were built using the proceeds of the loan agreement entered into by and between the Republic of the Philippines and the Asian Development Bank on December 12, 1971.
the policy of the Government to promote the development of the fishing industry and improve efficiency in the handling, preserving, marketing and distribution of fish and fishery/aquatic products through the establishment and operation of fish markets and the efficient operation of fishing ports harbors and other marketing facilities.
. . .
The PFMA was furthermore extended exemption from the payment of income tax in this tenor:
The authority shall be exempted from the payment of income tax.
The foregoing exemption may, however, be entirely or partly lifted by the President of the Philippines, upon recommendation of the Secretary of Finance, not earlier than five years from the approval of this Decree, if the President shall find the authority to be self-sustaining and financially capable to pay such tax after providing for debt service requirements of the authority and its projected capital and operating expenditures.
Meanwhile, harbor operations at the
Navotas Fishing Port Complex (NFPC) commenced on
(a) The creation of the Philippine Fisheries Development Authority (PFDA) to replace the Philippine Fish Marketing Authority (PFMA).
. . .
(b) The capitalization of the PFDA has included the Navotas Fishing Port Complex (NFPC).
. . .
(c) The NFPC has been transferred to the exclusive jurisdiction, control, administration, and supervision of the PFDA.
. . .
There can, therefore, [be] no
escaping the conclusion that the appellant PFDA became the owner of the Navotas
Fishing Port Complex as of
. . .
Indeed, it is quite true that a property continues to be part of the public domain, and not available for alienation, private appropriation or ownership, until it is withdrawn from being such by the Government through the Executive Department or the Legislative, and that it is not for the President to convey valuable real property of the Government on his own sole will as any such conveyance requires executive and legislative concurrence.
But the stark reality is that at the
time E.O. No, 772 was issued on
The fact that the PFDA has up to now
no certificate of title to the NFPC nor has the PFDA declared it for tax
purposes is of no consequence. Such a certificate is merely an evidence of
ownership and not the title itself,
while a tax declaration does not prove nor disprove ownership. What is
significant is that the PFDA has openly declared and represented that it owns,
maintains and operates the NFPC when it leased a portion thereof to the
Frabelle Fishing Corporation on
told, the PFDA being the owner of the NFPC beginning
WHEREFORE, the appealed decision is AFFIRMED, without pronouncement as to costs.
Petitioner filed a motion for reconsideration but the same was denied by the CA.
Petitioner now raises the following arguments:
One, the CA acknowledged that the property in question is a reclaimed land. As such, it is a property of public dominion (Art. 420, Civil Code) and is owned by the State. Notwithstanding this, the CA erroneously ruled that the government had validly transferred ownership of the land to PFDA in 1982 when P.D. No. 977 was amended by E.O. No. 772 by virtue of which the property became part of the assets of PFDA (Sec. 5 of E.O. No. 772);
Two, as a reclaimed land, the port complex should be considered a reserved land. In NDC v. Cebu City, the Supreme Court held that a reserved land is a public land that has been withheld or kept back from sale or disposition. The land remains an absolute property of the government. As its title remains with the State, the reserved land is tax exempt;
Three, in Government v. Cabangis and Lampria v. Director of Lands, this Court declared that the land reclaimed from the sea, as a result of the construction by the government of a breakwater fronting the place where it is situated, belongs to the State in accordance with Article 5 of the Law of Waters of 1866;
petitioner merely operates the area or the NFPC complex in favor of the
Republic of the
[M]anage, administer, operate, improve and modernize, coordinate and otherwise govern the activities, operation and facilities in the fishing ports, markets and landings that may hereinafter be placed under, or transferred to the Authority, and such other fish markets, fishing ports/harbors and infrastructure facilities as may be established under this Decree; to investigate, prepare, adopt, implement and execute a comprehensive plan for the overall development of fishing port and market complexes and update such plan as may be necessary from time to time; to construct or authorize the construction in the land area under its jurisdiction, of infrastructure facilities, factory buildings, warehouses, cold storage and ice plants, and other structures related to the fishing industry or necessary and useful in the conduct of its business or in the attainment of the purpose and objectives of this Decree; to acquire, hold and dispose real and personal property in the exercise of its functions and powers.
Lastly, the NFPC property is intended for public use and public service. As such, it is owned by the State, hence, exempt from real property tax.
The issue is whether petitioner is liable to pay real property tax.
SEC. 133. Common Limitations on the Taxing Power 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:
Nonetheless, the above exemption does not apply when the beneficial use of the government property has been granted to a taxable person. Section 234 (a) of the Code states that real property owned by the Republic of the Philippines or any of its political subdivisions is exempted from payment of the real property tax except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
Thus, as a rule, petitioner PFDA, being an instrumentality of the national government, is exempt from real property tax but the exemption does not extend to the portions of the NFPC that were leased to taxable or private persons and entities for their beneficial use.
This is in consonance with the ruling in Philippine Fisheries Development Authority v. Court of Appeals where this Court held that:
On the basis of the parameters set in the MIAA
In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as among the instrumentalities of the national government 
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. 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.
real property tax assessments issued by the City of
The port built by the State in the
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of national wealth.
Similarly, for the same reason, the
NFPC cannot be sold at public auction in satisfaction of the tax delinquency
assessments made by the
Additionally, the land on which the NFPC property sits is a reclaimed land, which belongs to the State. In Chavez v. Public Estates Authority, the Court declared that reclaimed lands are lands of the public domain and cannot, without Congressional fiat, be subject of a sale, public or private. 
In light of the above, petitioner
is only liable to pay the amount of
P62,841,947.79 representing the total taxes due as
of December 31, 2001 from PFDA-owned properties that were leased, as shown in
the Summary of Realty Taxes Due Properties Owned and/or Managed by PFDA as per
Realty Tax Order of Payment dated September 16, 2002.
petition is GRANTED. The Decision
and Resolution of the Court of Appeals, dated
P62,841,947.79 representing the total taxes due as of
ADOLFO S. AZCUNA
REYNATO S. PUNO
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA
Associate Justice Associate Justice
CANCIO C. GARCIA
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
 Under Rule 45 of the Rules of Court.
 Rollo, pp.100-101.
 Appellants Brief; CA Rollo, pp. 38-39.
 Article 420, Civil Code; Government v. Cabangis, 53 Phil. 112 (1929).
 Exhibit L.
 Exhibit K.
 Section 1, Presidential Decree No. 977.
 Section 10, id.
 Ignacio v. Director of Lands, 108 Phil. 316 (1960).
 Laurel v. Garcia, G.R. No.
 Legaspi v. Minister of Finance, No. L-58289, 115 SCRA 418.
 Noblejas and Noblejas, Registration of Land Titles and Deeds, 1992 ed., p. 4.
 Supra note 7, Section 10.
 Rollo, pp. 20-27.
 G.R. No. 51593,
 53 Phil. 112 (1929).
 67 Phil. 338 (1939).
 Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical persons unless otherwise provided in this Code.
 A national government instrumentality is 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 (Section 2  of the Introductory Provisions of the Administrative Code). The PFDA (then Philippine Fish Marketing Authority/PFMA), pursuant to P.D. No. 977, as amended by E.O. No. 772, is tasked with the special function of promoting the development of the countrys fishing industry and improve the efficiency in handling, preserving, marketing, and distribution of fish and other aquatic products.
 G.R. No. 169836,
 G.R. No. 155650,
 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, and Philippine National Railways.
 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 (Supra note 21, citing Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, vol. 3, 1998 edition, pp. 54-55).
 Sec. 5. Capitalization; Sinking
Fund. The Authority shall have an
authorized capital stock of Five Hundred Million Pesos (
which shall be fully subscribed by the Republic of the
(a) The net assets of the Authority, including the Navotas Fishing Port Complex, the valuation of which shall be determined jointly with the Office of Budget and Management and the Commission on Audit;
(b) The amount corresponding to the balance of the programmed appropriations for the Authority for calendar year 1981; and
(c) The amount corresponding to the programmed appropriations for the Authority for the calendar year 1982 (P.D. No. 977, as amended by E.O. No. 772).
The Authority is authorized to establish a sinking fund necessary to meet such obligations as may be incurred by the Authority. The annual contributions to the sinking fund shall come from the revenues derived from its fishing port complexes and, where such revenues are deficient, from such other corporate funds not otherwise intended for any specific purpose as may be designated by the Board. Unless otherwise directed shall invest the same in such manner as may be advantageous to the Authority.
 Manila International Airport Authority (MIAA) v. Court of Appeals, supra note 22.
 G.R. No. 133250,
 It is axiomatic that when public property is
involved, exemption is the rule and taxation, the exception (Social Security
System v. City of Bacolod, G.R. No. L-35726,
 Rollo, p. 212.