G.R. No. 120082 September 11, 1996
Mactan Cebu International Airport Authority vs. Hon. Ferdinand J. Marcos, et al.

FACTS

Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by Republic Act No. 6958 to manage and supervise airports in Cebu. Section 14 of its charter expressly exempted it from realty taxes. In October 1994, the City of Cebu, through its Treasurer, demanded payment of realty taxes on MCIAA’s properties. MCIAA objected, invoking its statutory tax exemption and claiming it was an instrumentality of the national government performing governmental functions, thus falling under the common limitation in Section 133(o) of the Local Government Code (LGC), which prohibits local governments from taxing national government instrumentalities.
The City of Cebu refused, contending that MCIAA was a government-owned and controlled corporation (GOCC) performing proprietary functions. It argued that under Sections 193 and 234 of the LGC, which took effect in 1992, all tax exemptions previously granted to persons or juridical entities, including GOCCs, were expressly withdrawn. Compelled to pay under protest to prevent a levy, MCIAA filed a petition for declaratory relief. The Regional Trial Court dismissed the petition, ruling that the LGC had withdrawn MCIAA’s exemption.

ISSUE

Whether the MCIAA remains exempt from payment of real property taxes to the City of Cebu after the effectivity of the Local Government Code of 1991.

RULING

The Supreme Court denied the petition and affirmed the RTC. The Court held that MCIAA’s tax exemption was withdrawn by the LGC. The legal logic proceeds from a clear statutory construction. First, the Court determined that MCIAA, while performing essential public functions, is constitutionally and statutorily classified as a GOCC. As such, it falls squarely within the scope of Sections 193 and 234 of the LGC, which categorically withdraw tax exemptions from all persons and juridical entities, including GOCCs. The Court emphasized that the LGC’s withdrawal provision is explicit, direct, and comprehensive, leaving no room for exception unless specifically stated in the Code itself.
Second, the Court rejected the argument that MCIAA, as a government instrumentality, is shielded by Section 133(o) of the LGC. The Court clarified that the term “instrumentality” in Section 133(o) refers to agencies of the national government that are not organized as corporations. Since MCIAA is explicitly constituted as a GOCC, it is not considered an “instrumentality” for the purposes of that limiting provision. The legislative intent to empower local governments is paramount. The LGC represents a constitutional mandate for local autonomy, and the withdrawal of exemptions is a key fiscal component. A general law like the LGC, enacted later, can repeal or modify the special tax exemption in MCIAA’s charter. Therefore, the City of Cebu validly assessed the real property taxes.