In a 25-page decision penned by Associate Justice Marvic Leonen, the SC’s Third Division granted the suit filed by MWSS seeking the reversal of the October 19, 2010 decision of the Court of Appeals which held that it was liable to pay real property taxes despite being an instrumentality of the government.
Associate Justices Diosdado Peralta and Ramon Paul Hernando concurred. 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.
The CA 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 dues to its privatization in 1997.
The appellate court concluded that since the properties were held by MWSS in the exercise of its proprietary functions, they were subject still subject to real property tax.
The SC said it recognizes 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 High Court noted that in the precedent case of Manila International Airport Authority (MIAA) vs. Paranaque City government case in 2006, when then President Gloria Macapagal-Arroyo issued Executive Order 596 which recognized the Court’s categorization of government instrumentalities vested with corporate with powers.
Under this provision, MWSS is categorized with other government agencies that that were found to be exempt from payment of real property taxes.
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.
Therefore, the Court said MWSS is not liable to pay real property taxes to 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 Court 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 did not after the CA issued a temporary restraining order.
“The temporary restraining orders issued by this Court on January 26, 2011 and September 7, 2011, are made permanent,” the SC said.