Republic
of the
SUPREME
COURT
THIRD DIVISION
|
GOVERNMENT
SERVICE INSURANCE SYSTEM, Petitioner, -
versus - CITY
TREASURER and CITY ASSESSOR of the CITY OF Respondents. |
|
G.R. No. 186242 Present: VELASCO,
JR., NACHURA, PERALTA,
and Promulgated: December
23, 2009 |
x-----------------------------------------------------------------------------------------x
D E C I S I O N
VELASCO, JR., J.:
The Case
For review under Rule 45 of the Rules of Court on
pure question of law are the November 15, 2007 Decision[1]
and January 7, 2009 Order[2]
of the Regional Trial Court (RTC), Branch 49 in Manila, in Civil Case No.
02-104827, a suit to nullify the assessment of real property taxes on certain
properties belonging to petitioner Government Service Insurance System (GSIS).
The Facts
Petitioner
GSIS owns or used to own two (2) parcels of land, one located at Katigbak 25th
St., Bonifacio Drive, Manila (Katigbak property), and the other, at Concepcion
cor. Arroceros Sts., also in Manila (Concepcion-Arroceros property). Title to
the Concepcion-Arroceros property was transferred to this Court in 2005
pursuant to Proclamation No. 835[3] dated
The
controversy started when the City Treasurer of Manila addressed a letter[4]
dated September 13, 2002 to GSIS President and General Manager Winston F.
Garcia informing him of the unpaid real property taxes due on the
aforementioned properties for years 1992
to 2002, broken down as follows: (a) PhP 54,826,599.37 for the Katigbak property;
and (b) PhP 48,498,917.01 for the Concepcion-Arroceros property. The letter
warned of the inclusion of the subject properties in the scheduled October 30,
2002 public auction of all delinquent properties in
On
Two
days after, GSIS filed a petition for certiorari
and prohibition[7] with
prayer for a restraining and injunctive relief before the Manila RTC. In it, GSIS prayed for the nullification of
the assessments thus made and that
The
Ruling of the RTC
By
Decision of November 15, 2007, the RTC dismissed GSIS’ petition, as follows:
WHEREFORE,
in view of the foregoing, judgment is hereby rendered, DISMISSING the petition
for lack of merit, and declaring the assessment conducted by the
SO
ORDERED.[9]
GSIS
sought but was denied reconsideration per the assailed Order dated January 7,
2009.
Thus,
the instant petition for review on pure question of law.
The Issues
1. Whether petitioner is exempt from the payment
of real property taxes from 1992 to 2002;
2. Whether petitioner is exempt from the payment
of real property taxes on the property it leased to a taxable entity; and
3. Whether petitioner’s real properties are
exempt from warrants of levy and from tax sale for non-payment of real property
taxes.[10]
The
Court’s Ruling
The issues raised may be formulated
in the following wise: first,
whether GSIS under its charter is exempt from real property taxation; second,
assuming that it is so exempt, whether GSIS is liable for real property taxes
for its properties leased to a taxable entity; and third, whether the
properties of GSIS are exempt from levy.
In the main, it is petitioner’s
posture that both its old charter,
Presidential Decree No. (PD) 1146, and present charter, RA 8291 or the GSIS
Act of 1997, exempt the agency and its properties from all forms of taxes
and assessments, inclusive of realty tax. Excepting, respondents counter that
GSIS may not successfully resist the
city’s notices and warrants of levy on the basis of its exemption under
RA 8291, real property taxation being governed by RA 7160 or the Local
Government Code of 1991 (LGC, hereinafter).
The petition is meritorious.
First Core Issue: GSIS Exempt from Real Property Tax
Full
tax exemption granted through PD 1146
In 1936, Commonwealth Act No. (CA)
186[11]
was enacted abolishing the then pension systems under Act No. 1638, as amended,
and establishing the GSIS to manage the pension system, life and retirement
insurance, and other benefits of all government employees. Under what may be considered as its first charter,
the GSIS was set up as a non-stock corporation managed by a board of
trustees. Notably, Section 26 of CA 186
provided exemption from any legal process and liens but only for insurance policies
and their proceeds, thus:
Section 26.
Exemption from legal process and liens. — No policy of life insurance
issued under this Act, or the proceeds thereof, when paid to any member
thereunder, nor any other benefit granted under this Act, shall be liable to
attachment, garnishment, or other process, or to be seized, taken,
appropriated, or applied by any legal or equitable process or operation of law
to pay any debt or liability of such member, or his beneficiary, or any other
person who may have a right thereunder, either before or after payment; nor
shall the proceeds thereof, when not made payable to a named beneficiary,
constitute a part of the estate of the member for payment of his debt. x x x
In 1977, PD 1146,[12]
otherwise known as the Revised Government Service Insurance Act of 1977,
was issued, providing for an expanded
insurance system for government employees. Sec. 33 of PD 1146 provided for a new tax
treatment for GSIS, thus:
Section 33. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of the
State that the actuarial solvency of the funds of the System shall be preserved
and maintained at all times and that the contribution rates necessary to
sustain the benefits under this Act shall be kept as low as possible in order
not to burden the members of the System and/or their employees. Taxes imposed on the System tend to impair
the actuarial solvency of its funds and increase the contribution rate
necessary to sustain the benefits under this Act. Accordingly, notwithstanding any laws to the contrary, the System,
its assets, revenues including all accruals thereto, and benefits paid, shall
be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly
and specifically revoked and any assessment against the System as of the
approval of this Act are hereby considered paid.
The benefits granted under this Act shall not be
subject, among others, to attachment, garnishment, levy or other processes. This, however, shall not apply to obligations
of the member to the System, or to the employer, or when the benefits granted
herein are assigned by the member with the authority of the System. (Emphasis ours.)
A scrutiny of PD 1146 reveals that
the non-stock corporate structure
of GSIS, as established under CA 186, remained unchanged. Sec. 34[13]
of PD 1146 pertinently provides that the GSIS, as created by CA 186, shall
implement the provisions of PD 1146.
RA
7160 lifted GSIS tax exemption
Then came the enactment in 1991 of
the LGC or RA 7160, providing the exercise of local government units (LGUs) of
their power to tax, the scope and limitations thereof,[14]
and the exemptions from taxations. Of particular pertinence is the general
provision on withdrawal of tax exemption privileges in Sec. 193 of the LGC, and
the special provision on withdrawal of exemption from payment of real property
taxes in the last paragraph of the succeeding Sec. 234, thus:
SEC. 193. Withdrawal
of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or -controlled
corporations, except local water districts, cooperatives duly registered under
R.A. No. 6938, non-stock and non-profit hospitals and educational institutions,
are hereby withdrawn upon the effectivity of this Code.
SEC. 234. Exemption from Real Property Tax. – x
x x Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or controlled corporation are hereby
withdrawn upon the effectivity of this Code.
From the foregoing provisos, there
can be no serious doubt about the Congress’ intention to withdraw, subject to
certain defined exceptions, tax exemptions granted prior to the passage of RA
7160. The question that easily comes to
mind then is whether or not the full tax exemption heretofore granted to GSIS
under PD 1146, particular insofar as realty tax is concerned, was deemed withdrawn. We answer in the affirmative.
In Mactan Cebu International
Airport Authority v. Marcos,[15] the Court held that the express
withdrawal by the LGC of previously granted exemptions from realty taxes
applied to instrumentalities and government-owned and controlled corporations (GOCCs),
such as the Mactan-Cebu International Airport Authority. In City of Davao
v. RTC, Branch XII, Davao City,[16]
the Court, citing Mactan Cebu International Airport Authority, declared the
GSIS liable for real property taxes for the years 1992 to 1994 (contested real
estate tax assessment therein), its previous exemption under PD 1146 being
considered withdrawn with the enactment of the LGC in 1991.
Significantly, the Court, in City
of
Full
tax exemption reenacted through RA 8291
Indeed, almost 20 years to the day
after the issuance of the GSIS charter, i.e., PD 1146, it was further amended
and expanded by RA 8291 which took effect on June 24, 1997.[18] Under it, the full tax exemption privilege of
GSIS was restored, the operative provision being Sec. 39 thereof, a virtual
replication of the earlier quoted Sec. 33 of PD 1146. Sec. 39 of RA 8291 reads:
SEC. 39.
Exemption from Tax, Legal Process
and Lien. – It is hereby declared to be the policy of the State that the
actuarial solvency of the funds of the GSIS shall be preserved and maintained
at all times and that contribution rates necessary to sustain the benefits
under this Act shall be kept as low as possible in order not to burden the
members of the GSIS and their employers.
Taxes imposed on the GSIS tend to impair the actuarial solvency of its
funds and increase the contribution rate necessary to sustain the benefits of
this Act. Accordingly, notwithstanding,
any laws to the contrary, the GSIS, its assets, revenues including all
accruals thereto, and benefits paid, shall be exempt from all taxes,
assessments, fees, charges or duties of all kinds. These exemptions shall continue unless
expressly and specifically revoked and any assessment against the GSIS as of
the approval of this Act are hereby considered paid. Consequently, all laws, ordinances,
regulations, issuances, opinions or jurisprudence contrary to or in derogation
of this provision are hereby deemed repealed, superseded and rendered
ineffective and without legal force and effect.
Moreover, these exemptions shall not be affected by subsequent
laws to the contrary unless this section is expressly, specifically and
categorically revoked or repealed by law and a provision is enacted to
substitute or replace the exemption referred to herein as an essential factor
to maintain or protect the solvency of the fund, notwithstanding and
independently of the guaranty of the national government to secure such
solvency or liability.
The funds and/or the properties referred to herein as well as
the benefits, sums or monies corresponding to the benefits under this Act shall
be exempt from attachment, garnishment, execution, levy or other processes
issued by the courts, quasi-judicial agencies or administrative bodies
including Commission on Audit (COA) disallowances and from all financial
obligations of the members, including his pecuniary accountability arising from
or caused or occasioned by his exercise or performance of his official
functions or duties, or incurred relative to or in connection with his position
or work except when his monetary liability, contractual or otherwise, is in
favor of the GSIS. (Emphasis ours.)
The foregoing exempting proviso,
couched as it were in an encompassing manner, brooks no other construction but
that GSIS is exempt from all forms of taxes.
While not determinative of this case, it is to be noted that prominently
added in GSIS’ present charter is a paragraph precluding any implied repeal of
the tax-exempt clause so as to protect the solvency of GSIS funds. Moreover, an express repeal by a subsequent
law would not suffice to affect the full exemption benefits granted the GSIS,
unless the following conditionalities
are met: (1)
The repealing clause must expressly, specifically, and categorically
revoke or repeal Sec. 39; and (2) a
provision is enacted to substitute or replace the exemption referred to
herein as an essential factor to maintain or protect the solvency of the
fund. These restrictions for a future
express repeal, notwithstanding, do not make the proviso an irrepealable law,
for such restrictions do not impinge or limit the carte blanche
legislative authority of the legislature to so amend it. The restrictions merely enhance other
provisos in the law ensuring the solvency of the GSIS fund.
Given the foregoing perspectives, the
following may be assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax
exemption from real estate taxes, among other tax burdens, until January 1,
1992 when the LGC took effect and
withdrew exemptions from payment of real estate taxes privileges granted under
PD 1146; (2) RA 8291 restored in 1997 the tax exempt status of GSIS by
reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146;[19]
and (3) If any real estate tax is due to the City of Manila, it is, following City
of Davao, only for the interim period, or from 1992 to 1996, to be precise.
Real property taxes
assessed and due from GSIS considered paid
While recognizing the exempt status
of GSIS owing to the reenactment of the full tax exemption clause under Sec. 39
of RA 8291 in 1997, the ponencia in City of Davao appeared to
have failed to take stock of and fully
appreciate the all-embracing condoning proviso in the very same Sec. 39 which,
for all intents and purposes, considered as paid “any assessment
against the GSIS as of the approval of this Act.” If only to stress the point, we hereby
reproduce the pertinent portion of said Sec. 39:
SEC. 39. Exemption from Tax, Legal Process and Lien.
– x x x Taxes imposed on the GSIS tend
to impair the actuarial solvency of its funds and increase the contribution
rate necessary to sustain the benefits of this Act. Accordingly, notwithstanding, any laws to the
contrary, the GSIS, its assets, revenues including all accruals thereto,
and benefits paid, shall be exempt
from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless
expressly and specifically revoked and any assessment against the GSIS as
of the approval of this Act are hereby considered paid. Consequently, all laws, ordinances,
regulations, issuances, opinions or jurisprudence contrary to or in derogation
of this provision are hereby deemed repealed, superseded and rendered
ineffective and without legal force and effect. (Emphasis added.)
GSIS
an instrumentality of the National Government
Apart from the foregoing
consideration, the Court’s fairly recent ruling in Manila International
Airport Authority v. Court of Appeals,[20] a
case likewise involving real estate tax assessments by a Metro Manila city on the real properties
administered by MIAA, argues for the non-tax liability of GSIS for real estate taxes. There, the Court held that MIAA does not
qualify as a GOCC, not having been organized either as a stock corporation, its
capital not being divided into shares, or as a non-stock corporation because it
has no members. MIAA is rather an instrumentality
of the National Government and, hence, outside the purview of local taxation by
force of Sec. 133 of the LGC providing in context that “unless otherwise provided,”
local governments cannot tax national government instrumentalities. And as the Court pronounced in Manila International Airport
Authority, the airport
lands and buildings MIAA administers belong to the Republic of the Philippines,
which makes MIAA a mere trustee of such
assets. No less than the Administrative
Code of 1987 recognizes a scenario where a piece of land owned by the Republic
is titled in the name of a department, agency, or instrumentality. The
following provision of the said Code suggests as much:
Sec. 48. Official
Authorized to Convey Real Property.––Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following: x x x x
(2) For property belonging to the Republic of the
While perhaps not of governing sway
in all fours inasmuch as what were involved in Manila International Airport
Authority, e.g., airfields and runways, are properties of the public
dominion and, hence, outside the commerce of man, the rationale underpinning
the disposition in that case is squarely applicable to GSIS, both MIAA and GSIS being similarly
situated. First, while created
under CA 186 as a non-stock corporation, a status that has remained unchanged
even when it operated under PD 1146 and RA 8291, GSIS is not, in the context of
the afore quoted Sec. 193 of the LGC,
a GOCC following the teaching of Manila International Airport Authority, for, like MIAA, GSIS’ capital is
not divided into unit shares. Also, GSIS has no members to speak of. And by
members, the reference is to those who, under Sec. 87 of the Corporation Code,
make up the non-stock corporation, and not to the compulsory members of the
system who are government employees. Its
management is entrusted to a Board of Trustees whose members are appointed by
the President.
Second, the subject properties under GSIS’s
name are likewise owned by the Republic.
The GSIS is but a mere trustee of the subject properties which have
either been ceded to it by the Government or acquired for the enhancement of
the system. This particular property
arrangement is clearly shown by the fact that the disposal or conveyance of
said subject properties are either done by or through the authority of the
President of the
WHEREAS, by virtue of the Public Land Act
(Commonwealth Act No. 141, as amended), Presidential Decree No. 1455, and the
Administrative Code of 1987, the President is authorized to transfer any
government property that is no longer needed by the agency to which it
belongs to other branches or agencies of the government. (Emphasis ours.)
Third, GSIS manages the funds for the life
insurance, retirement, survivorship, and disability benefits of all government
employees and their beneficiaries. This
undertaking, to be sure, constitutes an essential and vital function which the
government, through one of its agencies or instrumentalities, ought to perform
if social security services to civil service employees are to be delivered with
reasonable dispatch. It is no wonder, therefore, that the Republic guarantees
the fulfillment of the obligations of the GSIS to its members (government
employees and their beneficiaries) when and as they become due. This guarantee
was first formalized under Sec. 24[22]
of CA 186, then Sec. 8[23]
of PD 1146, and finally in Sec. 8[24]
of RA 8291.
Second Core Issue: Beneficial Use Doctrine Applicable
The
foregoing notwithstanding, the leased Katigbak property shall be taxable
pursuant to the “beneficial use” principle under Sec. 234(a) of the LGC.
It is true that said Sec. 234(a), quoted
below, exempts from real estate taxes real property owned by the Republic,
unless the beneficial use of the property is, for consideration, transferred to
a taxable person.
SEC. 234.
Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax:
(a) Real
property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
This exemption, however, must be read in relation with Sec. 133(o) of the LGC, which prohibits LGUs from imposing taxes or fees of any kind on the national government, its agencies, and instrumentalities:
SEC. 133. Common
Limitations on the Taxing Powers of Local Government Units. –
Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
x x x x
(o) Taxes, fees or charges of any kinds on the
National Government, its agencies and instrumentalities, and local
government units. (Emphasis supplied.)
Thus
read together, the provisions allow the Republic to grant the beneficial use of
its property to an agency or instrumentality of the national government. Such
grant does not necessarily result in the loss of the tax exemption. The tax
exemption the property of the Republic or its instrumentality carries ceases
only if, as stated in Sec. 234(a) of the LGC of 1991, “beneficial use thereof
has been granted, for a consideration or otherwise, to a taxable person.” GSIS, as a government instrumentality, is not
a taxable juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in
a sense that status with respect to the Katigbak property when it contracted
its beneficial use to MHC, doubtless a taxable person. Thus, the real estate
tax assessment of PhP 54,826,599.37 covering 1992 to 2002 over the subject
Katigbak property is valid insofar as said tax delinquency is concerned as
assessed over said property.
Taxable entity having
beneficial use of leased
property liable
for real property taxes thereon
The
next query as to which between GSIS, as the owner of the Katigbak property, or
MHC, as the lessee thereof, is liable to pay the accrued real estate tax, need
not detain us long. MHC ought to pay.
As
we declared in Testate Estate of Concordia T. Lim, “the unpaid tax attaches to the property and is chargeable
against the taxable person who had actual or beneficial use and possession of
it regardless of whether or not he is the owner.” Of the same tenor is the
Court’s holding in the subsequent Manila Electric Company v. Barlis[25] and
later in Republic v. City of
Being
in possession and having actual use of the Katigbak property since November
1991, MHC is liable for the realty taxes assessed over the Katigbak property
from 1992 to 2002.
The
foregoing is not all. As it were, MHC has obligated itself under the
GSIS-MHC Contract of Lease to shoulder such assessment. Stipulation l8 of the contract pertinently
reads:
18. By law, the Lessor, [GSIS], is exempt
from taxes, assessments and levies.
Should there be any change in the law or the interpretation thereof or
any other circumstances which would subject the Leased Property to any kind of
tax, assessment or levy which would constitute a charge against the Lessor or
create a lien against the Leased Property, the Lessee agrees and obligates
itself to shoulder and pay such tax, assessment or levy as it becomes due.[28] (Emphasis
ours.)
As
a matter of law and contract, therefore, MHC stands liable to pay the realty taxes due on the Katigbak
property. Considering, however, that MHC
has not been impleaded in the instant case, the remedy of the City of
Third
Core Issue: GSIS Properties Exempt from Levy
In light of the foregoing
disquisition, the issue of the propriety of the threatened levy of subject
properties by the City of
SEC. 39. Exemption from Tax, Legal Process and Lien.
– x x x.
x x x x
The funds and/or the properties referred to herein as
well as the benefits, sums or monies corresponding to the benefits under this
Act shall be exempt from attachment, garnishment, execution, levy or other
processes issued by the courts, quasi-judicial agencies or administrative
bodies including Commission on Audit (COA) disallowances and from all
financial obligations of the members, including his pecuniary accountability
arising from or caused or occasioned by his exercise or performance of his
official functions or duties, or incurred relative to or in connection with his
position or work except when his monetary liability, contractual or otherwise,
is in favor of the GSIS. (Emphasis ours.)
The Court would not be indulging in
pure speculative exercise to say that the underlying legislative intent behind
the above exempting proviso cannot be other than to isolate GSIS funds and
properties from legal processes that will either impair
the solvency of its fund or hamper its
operation that would ultimately require an increase in the contribution
rate necessary to sustain the benefits of the system. Throughout GSIS’ life
under three different charters, the need to ensure the solvency of GSIS fund
has always been a legislative concern, a concern expressed in the tax-exempting
provisions.
Thus, even granting arguendo
that GSIS’ liability for realty taxes attached from 1992, when RA 7160
effectively lifted its tax exemption under PD 1146, to 1996, when RA 8291
restored the tax incentive, the levy on the subject properties to answer for
the assessed realty tax delinquencies cannot still be sustained. The simple
reason: The governing law, RA 8291, in force at the time of the levy prohibits
it. And in the final analysis, the
proscription against the levy extends to the leased Katigbak property, the
beneficial use doctrine, notwithstanding.
Summary
In sum, the Court finds that GSIS enjoys under its
charter full tax exemption. Moreover, as an instrumentality of the national
government, it is itself not liable to pay real estate taxes assessed by the
City of
WHEREFORE, the
instant petition is hereby GRANTED. The November 15, 2007 Decision and
January 7, 2009 Order of the Regional Trial Court, Branch 49,
No pronouncement as to costs.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE
CONCUR:
RENATO C. CORONA
Associate Justice
Chairperson
ANTONIO EDUARDO B. NACHURA DIOSDADO M. PERALTA
Associate Justice Associate Justice
MARIANO C.
Associate Justice
A T T E S T
A T I O N
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Associate Justice
Chairperson
C E R T I F I
C A T I O N
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
REYNATO
S. PUNO
Chief Justice
[1] Rollo, pp. 29-38. Penned by Judge Concepcion S. Alarcon-Vergara.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11] Entitled “An Act to Create and Establish a ‘Government Service Insurance System,’ to Provide for its Administration, and to Appropriate the Necessary Funds Therefor.”
[12] Entitled “Amending, Expanding, Increasing and Integrating the Social Security and Insurance Benefits of Government Employees and Facilitating the Payment Thereof Under Commonwealth Act No. 186, as Amended, and for Other Purposes,” approved on May 31, 1977.
[13] Section 34. Implementing Body.––The Government Service Insurance System as created and established under Commonwealth Act No. 186 shall implement the provisions of this Act.
[14] Sec. 133(o) of the LGC provides that the taxing power of LGUs shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and LGUs.
[15]
G.R. No. 120082,
[16]
G.R. No. 127383,
[17]
[18] After its publication in the June 9, 1997 issue of the Philippine Star.
[20]
G.R. No. 155650,
[22] Section 24. Accounts to be maintained. — The System shall keep separate and distinct from one another the following funds:
(a) x x x x
The
Government of the Republic of the
[23]
Section 8. Government Guarantee.––The Government
of the Republic of the
[24] SEC. 8. Government Guarantee. – The government
of the Republic of the
[25]
G.R. No. 114231,
[26]
G.R. No. 166651,
[27] Id at 333-334; citing Local Government Code, Sec. 199(b).
[28] Rollo, p. 48.