THE Supreme Court has permanently enjoined the Quezon City government from auctioning off the real properties and facilities of Metropolitan Waterworks and Sewerage System (MWSS) for failing to pay its tax dues amounting to P237.10 million.
In a 25-page decision penned by Associate Justice Marvic Leonen, the SC’s Third Division granted the petition filed by MWSS seeking the reversal of the October 19, 2010, decision of the Court of Appeals (CA), which held that the water regulator was liable to pay real-property taxes, despite being an instrumentality of the government.
The appellate court held that MWSS was not performing a purely governmental function; thus, it cannot invoke immunity from real-property taxation.
It further held that the taxed properties of MWSS were not part of the public dominion, but were even made the subject of concession agreements between MWSS and private concessionaires due to its privatization in 1997.
Thus, the CA concluded that since the properties were held by MWSS in the exercise of its proprietary functions, they were still subject to real-property tax.
In reversing the CA ruling, the SC recognized acts of the Executive and Legislative branches, which declared MWSS not as a government-owned and -controlled corporation, but as a government instrumentality with corporate powers.
The Court noted that after its
promulgation of Manila International Airport Authority (MIAA) v. Parañaque
City government case in 2006, then-President Gloria Macapagal-Arroyo issued
Executive Order 596, which recognized the Court’s categorization of
government instrumentalities vested with corporate with powers.
In the MIAA case, the SC held that it is exempt from paying real-estate taxes, being a government instrumentality vested with corporate powers to perform governmental functions.
Under this provision, the petitioner is categorized with other government agencies that were found to be exempt from payment of real-property taxes.
GOCC Governance Act
Meanwhile, in 2011, Congress passed Republic Act 10149, or the GOCC Governance Act of 2011, which adopted the same categorization and lists MWSS with the other government agencies that were previously held by the Court to be exempt from payment of real-property taxes.
As such, the High Court said MWSS is not liable to pay real-property taxes to the Quezon City government, except if the beneficial use of its properties has been extended to a taxable person.
“The real properties of the Metropolitan and Sewerage System located in Quezon City are declared exempt from the real-estate tax imposed by the local government of Quezon City,” the SC said.
“All the real-estate tax assessments, including the final notices of real-estate tax delinquencies, issued by the local government of Quezon City on the real properties of the Metropolitan Waterworks and Sewerage System located in Quezon City are declared void, except for the portions that are alleged and proven to have been leased to private properties,” it added.
MWSS has jurisdiction,
supervision and control over all waterworks and sewerage systems within
Metropolitan Manila, the entire province of Rizal and a portion of the province
of Cavite. It holds office at MWSS Compound, Katipunan Road, Balara,
Quezon City.
The properties of MWSS, including its pipelines, reservoirs and aqueducts were supposed to be auctioned off by the Quezon City government on September 27, 2007, but this was deferred after the CA issued a temporary restraining order.
After the MWSS lost its case before the CA, it elevated the case before the SC, which issued a new temporary retraining order in 2011 enjoining the sale of its properties.
“The temporary restraining orders issued by this Court on January 26, 2011, and September 7, 2011, are made permanent,” the SC said.
Concurring with the ruling were Associate Justices Diosdado Peralta and Ramon Paul Hernando.
Two other members of the Third Division—Associate Justices Alexander Gesmundo and Jose Reyes Jr.—did not vote on the issue as they were on wellness leave during its promulgation.
Image credits: mwss.gov.ph