G.R. No. 221626 , October 09, 2019
LIGHT RAIL TRANSIT AUTHORITY, PETITIONER, VS. QUEZON CITY, REPRESENTED BY THE CITY TREASURER AND THE CITY ASSESSOR, RESPONDENT.

FACTS

Pursuant to Executive Order No. 603, the Light Rail Transit Authority (LRTA) was created to construct, operate, maintain, and/or lease the light rail transit system. It acquired real properties and commenced operations in 1984. In 2000, the Supreme Court in LRTA v. Central Board of Assessment Appeals ruled that LRTA’s properties were patrimonial and subject to real property tax. In 2007, Quezon City issued Statements of Delinquency and Final Notices of Tax Delinquency against LRTA for unpaid realty taxes. LRTA contended it was a government instrumentality exempt from tax, citing the subsequent case of MIAA v. Court of Appeals. Despite LRTA’s communications, Quezon City proceeded to levy and auction LRTA’s properties in December 2007 and again in April 2010 due to non-payment. After LRTA’s right of redemption expired, it filed a petition for certiorari, prohibition, and injunction before the Regional Trial Court (RTC). The RTC dismissed the petition, sustaining the realty taxes based on the Local Government Code and the precedent in LRTA v. CBOA, and denied LRTA’s motion for reconsideration.

ISSUE

1. Whether the LRTA is a government-owned and controlled corporation (GOCC) or a government instrumentality.
2. Whether the LRTA’s properties are subject to real property tax.

RULING

1. The LRTA is not a GOCC but a government instrumentality. A GOCC must be organized as a stock or non-stock corporation. A stock corporation requires capital stock divided into shares and authorization to distribute dividends. A non-stock corporation requires members and a prohibition on income distribution. LRTA’s charter provides for an authorized capital but not capital stock or shares, and it does not have members. Its capitalization is similar to that of the Manila International Airport Authority (MIAA), which was declared a government instrumentality. LRTA is an incorporated agency vested with corporate powers but lacking the essential corporate attributes of a stock or non-stock corporation. Its primary purpose is governmental: to address the mass transportation crisis and ensure safe, efficient, and economical light rail services. Its operations are not proprietary or profit-oriented; it is not authorized to distribute dividends, and any surplus is reinvested into the system.
2. The LRTA’s properties are exempt from real property tax. Under Section 234 of the Local Government Code, real property owned by the Republic of the Philippines or any of its political subdivisions is exempt, except when beneficial use is granted to a taxable person. As a government instrumentality, LRTA is an agency of the National Government, and its properties are owned by the Republic and devoted to public use (the public mass transit system). The 2000 ruling in LRTA v. CBOA is superseded by the 2006 MIAA doctrine and subsequent jurisprudence (e.g., Mactan Cebu International Airport Authority v. City of Lapu-Lapu), which established that government instrumentalities performing governmental functions and whose properties are public in character are exempt from real property tax. The tax assessments, delinquency notices, and auction sales by Quezon City are void. However, Quezon City may assess and collect real property taxes from private parties to whom LRTA may have leased its property for private use.