G.R. No. 211299 , June 28, 2022
LIGHT RAIL TRANSIT AUTHORITY, PETITIONER, VS. CITY OF PASAY, REPRESENTED BY THE CITY TREASURER AND THE CITY ASSESSOR, RESPONDENT.

FACTS

From 1985 to 2001, the City of Pasay assessed the Light Rail Transit Authority (LRTA) real estate taxes on its properties. LRTA admitted its tax liabilities and proposed installment payments, even requesting condonation of penalties. However, LRTA failed to settle its obligations despite demands, leading the City to issue a notice of delinquency with warrants of levy. LRTA filed a Petition for Certiorari, Prohibition and Mandamus against the City before the Regional Trial Court (RTC) of Pasay, questioning the assessments. LRTA claimed it is a government instrumentality exempt from local taxation, citing the 2006 case of Manila International Airport Authority v. Court of Appeals (2006 MIAA Case), and argued the properties are owned by the Republic. It also invoked Ty v. Trampe to justify immediate judicial action without exhausting administrative remedies. The RTC dismissed the petition for being an improper remedy and lack of merit, a ruling affirmed by the Court of Appeals (CA). The CA held LRTA failed to exhaust administrative remedies and found it to be a taxable entity based on the 2000 case of LRTA v. Central Board of Assessment Appeals (2000 LRTA Case). LRTA elevated the case to the Supreme Court.

ISSUE

1. Whether the CA erred in ruling that LRTA failed to exhaust administrative remedies before resorting to the courts.
2. Whether the CA erred in ruling that LRTA is a taxable entity as held in the 2000 LRTA Case.
3. Whether the CA erred in not declaring LRTA a government instrumentality based on the 2006 MIAA Case, and thus exempt from realty taxes.

RULING

The Supreme Court granted the petition.
1. On exhaustion of administrative remedies: The Court ruled that the principle of exhaustion of administrative remedies admits of exceptions, including when the issue involved is purely a legal question. LRTA was questioning the very authority of the City to impose and collect real property tax on its properties, claiming it is a government instrumentality exempt from tax. This raises a pure question of law, falling under the exception recognized in Ty v. Trampe. Thus, direct resort to judicial action was proper.
2. On LRTA’s taxability and status: The Court held that the 2000 LRTA Case, which characterized LRTA as a government-owned or controlled corporation (GOCC) subject to tax, must be revisited in light of the 2006 MIAA Case. The 2006 MIAA Case clarified the distinction between government instrumentalities and GOCCs. Examining Executive Order No. 603 (1980), which created LRTA, the Court found that LRTA is a government instrumentality, not a GOCC. Its primary purpose is to construct and operate the light rail transit system as a vital public service, it performs governmental functions related to public transportation, it is not organized as a stock or non-stock corporation, its governing board is composed of government officials, its operating funds come from government appropriations and loans, and its income is exempt from tax and directed to a special fund. As a government instrumentality, LRTA is exempt from local real property tax under Section 133(o) of the Local Government Code, as its real properties are owned by the Republic of the Philippines and devoted for public use. The 2006 MIAA Case, being a more recent and definitive pronouncement, supersedes the 2000 LRTA Case on this point.
3. Conclusion: LRTA is a government instrumentality, and its real properties are owned by the Republic and used for public purpose. Consequently, these properties are exempt from real property tax imposed by the City of Pasay. The assessments and warrants of levy issued by the City are void.