Social Security System v. City of Bacolod
REITERATIONFacts
The Antecedents: The Social Security System (SSS), a government agency, maintained a five-storey building and four parcels of land in Bacolod City. For failure to pay real estate taxes for the years 1968, 1969, and 1970, amounting to P104,956.06 including penalties, the City of Bacolod levied upon and declared said properties forfeited in its favor. Procedural History: The SSS protested the forfeiture, arguing its exemption from real estate taxes as a government-owned and controlled corporation. After the City Treasurer took no action, the SSS filed a complaint for nullification of the forfeiture proceedings and sought a preliminary injunction. The Court of First Instance of Negros Occidental dismissed the complaint, ruling that the SSS was not exempt from real property tax as it did not fall under Section 29 of the City Charter and there was no law exempting it. The Petition: The SSS elevated the case to the Supreme Court, seeking to set aside the decision of the lower court.
Issue(s)
Whether the properties of the Social Security System (SSS) are exempt from real estate taxes. Whether Section 29 of the Charter of the City of Bacolod exempts government-owned properties from taxation regardless of their purpose (governmental or proprietary).
Ruling
The Supreme Court set aside the decision of the Court of First Instance, declared the properties of the Social Security System exempt from real estate taxes, and ordered the cancellation of the surety bond filed by the petitioner.
Ratio Decidendi
On the issue of SSS properties' exemption from real estate taxes: The Court held that under Section 29 of the Charter of the City of Bacolod, lands and buildings owned by the Commonwealth or Republic of the Philippines are exempt from taxation without qualification. This exemption is broad and comprehensive, applying regardless of whether the property is devoted to governmental or proprietary purposes. The Court emphasized that the intent of the legislature was to exempt all government-owned properties from such taxes. Furthermore, Presidential Decree No. 24, which amended the Social Security Act of 1954, explicitly removed all doubts regarding the SSS's exemption from taxation, including all its assets, contributions, and income. On the issue of Section 29's interpretation and its application to government-owned properties: The lower court erred in restricting the scope of the exemption to only those government agencies exercising governmental or sovereign functions. The Supreme Court clarified that Section 29 does not contain such a qualification. The exemption applies to "lands and buildings owned by the Commonwealth or Republic of the Philippines," which includes properties held for investment or proprietary purposes. The Court cited Section 3(a) of Commonwealth Act No. 470, which similarly exempts "properties owned by ... the Republic of the Philippines, any province, city, municipality or municipal district ..." without distinction between property held in a sovereign capacity and those possessed in a private proprietary character. The Court reiterated the principle that taxing government property would merely be transferring funds from one government pocket to another, defeating the purpose of taxation. The Court found the distinction between constituent (governmental) and ministrant (proprietary) functions, as discussed in NACOCO versus Bacani, to be irrelevant to the issue of real estate tax exemption for government-owned properties. What is decisive is that the properties are owned by the government, making exemption the rule and taxation the exception.
Main Doctrine
Properties owned by the government, even if devoted to proprietary purposes, are exempt from real estate taxes under Section 29 of the Charter of the City of Bacolod and Section 3(a) of Commonwealth Act No. 470, as a tax on government property would merely transfer funds from one government pocket to another.