Contributor: Adriano, Jake Zhan C.

Case Title: PHILIPPINE PORTS AUTHORITY vs. CITY OF ILOILO G.R. No. 109791
July 14, 2003 Real property Tax, Business Tax OCTOBER 30, 2017
Principle: Art. 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 the national wealth.

Facts: PPA is created under PD 857 and under Section 25 of its charter, PPA is
exempted from paying real property tax.
PPA is engaged in the business of arrastre and stevedoring and leasing of real
estate. Also, it owns a warehouse for its operation.
On June 11, 1984, PD 1931 withdrew all tax exemptions privileges granted to
GOCC.
Thus, the city of Iloilo seeks to collect from PPA business tax and real property
tax from the last quarter of 1984 up to the year 1986.
However, PPA claims that the City of Iloilo cannot collect real property taxes from
PPA because the warehouse is part of the port. Under Sec 420 of Civil Code, ports are
part of public dominion.
Issue: Whether or not Philippine Ports Authority is exempt from the payment of real
property tax and business tax.
Ruling: NO. The records show that the theory of petitioner before the trial court was
different from that of the present petition. Initially, it argued that as a government-owned
corporation, it is exempt from paying real property taxes by virtue of its specific
exemption in its charter, Section 40 of the Real Property Tax Code and Executive Order
No. 93. Subsequently, in the memorandum it filed with the trial court, it omitted its earlier
argument and changed its theory by alleging that it is a government instrumentality,
which, according to applicable jurisprudence, may not be taxed by the local
government.
PPA cannot claim that their warehouse is a public dominion because such theory
is different from the theory they adopted and decided by the lower court.
Thus, PPA is bound by its admission of ownership of the warehouse. It is
therefore liable to pay real property tax.
 Also, under Sec 420 of the CC, the ports mentioned are those “constructed by
the state”. Thus, PPA should prove that its port was constructed by the state in order to
conclude that such property is a public dominion. However, PPA failed to prove such.
Also, granting that its port is a public dominion, its warehouse which they
constructed is considered to be an improvement. And improvements made by the
occupants is not exempted from payment of tax.

BAR EXAM QUESTION

AAA is created under PD 123 and under section 12 of its charter, AAA is exempted from
paying real property tax. AAA is engaged in the business of arrastre and stevedoring
and leasing of real property. Also, it owns a warehouse for its operation. Later on, PD
1234 was enacted and withdrew all tax exemption privileges granted to GOCC. Thus,
the City of Cebu seeks to collect from AAA business tax and real property tax from the
last quarter of 1999 up to year 2001.However, AAA claims that the City of Cebu cannot
collect real property taxes from AAA because the warehouse is part of the port. Under
sec. 420 of Civil Code, ports are part of public dominion. Decide.

Answer: NO. AAA’s claims is untenable.

AAA cannot claim that their warehouse is a public dominion since the ports
mentioned under Section 420 of the Civil Code are those “constructed by the state”.
Thus, AAA should prove that its port was constructed by the state in order to conclude
that such property is a public dominion. However, AAA failed to prove such.
Also, granting that its port is a public dominion, its warehouse which they
constructed is considered to be an improvement. And improvements made by the
occupants is not exempted from payment of tax.