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SC stops QC on MWSS auction

The Supreme Court has permanently stopped the Quezon City government from auctioning off the real properties and facilities of Metropolitan Waterworks and Sewerage System due to its failure to pay its tax dues amounting to P237.10 million.

In a 25-page decision, the SC’s Third Division through Associate Justice Marvic Leonen granted the petition filed by MWSS seeking the reversal of the October 19, 2010 decision of the Court of Appeals, which held that  the water regulator  was liable to pay real property taxes despite being an instrumentality of the government.

The appellate court had ruled that MWSS was not performing a purely governmental function, thus, it could not invoke immunity from real property taxation.

The CA also said 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.

Because of this, the appellate court declared that since the properties were held by MWSS in the exercise of its proprietary functions, they were subject still to real property tax.

The SC, however, disagreed and instead 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 high court noted that after its promulgation of Manila International Airport Authority vs. 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 it was exempt from paying real estate taxes being a government instrumentality vested with corporate powers to perform governmental functions.

Under this provision, petitioner is categorized with other government agencies that that were found to be exempt from payment of real property taxes.

Meanwhile, in 2011, Congress passed Republic Act 10149 or the GOCC Governance Act of 2011, which adopted the same categorization and listed 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 tribunal stressed that MWSS  was not liable to pay real property taxes to Quezon City government, except if the beneficial use of its properties had 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 did not 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 TRO in 2011 enjoining  the sale of its properties.

“The temporary restraining orders issued by this Court on January 26, 2011 and Sept. 7, 2011, are made permanent,” the SC said.

Associate Justices Diosdado Peralta and Ramon Paul Hernando concurred with the ruling.

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.

Topics: Supreme Court , Quezon City government , Metropolitan Waterworks and Sewerage System , Marvic Leonen
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