Government Service Insurance System v. City Treasurer and City Assessor of the City of Manila
REITERATIONFacts
The Antecedents: The Government Service Insurance System (GSIS) received notices from the City Treasurer of Manila regarding unpaid real property taxes for two parcels of land: one at Katigbak Street and another at Concepcion cor. Arroceros Streets. The total outstanding taxes claimed were PhP 54,826,599.37 for the Katigbak property and PhP 48,498,917.01 for the Concepcion-Arroceros property, covering the years 1992 to 2002. The City Treasurer warned of a public auction if the taxes remained unsettled. GSIS contested these assessments, asserting its exemption from all taxes, including realty taxes, under Republic Act No. 8291. Procedural History: Following the notices of delinquency and the threat of auction, GSIS filed a petition for certiorari and prohibition with the Regional Trial Court (RTC) of Manila, seeking to nullify the tax assessments and enjoin the City of Manila officials from proceeding against its properties. The RTC, in its Decision dated November 15, 2007, dismissed GSIS's petition for lack of merit, upholding the validity of the assessments. GSIS's subsequent motion for reconsideration was denied by the RTC in an Order dated January 7, 2009. This led to the instant petition for review on a pure question of law. The Petition: The Government Service Insurance System (GSIS) filed this petition for review under Rule 45 of the Rules of Court, raising pure questions of law. GSIS argues that its charter, specifically Republic Act No. 8291 (the GSIS Act of 1997), grants it full exemption from all forms of taxes, including real property taxes. It contends that this exemption was in effect during the period in question, or that subsequent laws did not validly revoke this exemption. Furthermore, GSIS asserts that as an instrumentality of the national government, its properties are exempt from local taxation. The petition seeks to nullify the real property tax assessments and prevent any levy or sale of its properties by the City of Manila.
Issue(s)
Whether petitioner GSIS is exempt from the payment of real property taxes from 1992 to 2002. Whether petitioner GSIS is exempt from the payment of real property taxes on the property it leased to a taxable entity. Whether petitioner GSIS’s real properties are exempt from warrants of levy and from tax sale for non-payment of real property taxes.
Ruling
The Supreme Court granted the petition, reversing and setting aside the RTC's decision. The real property tax assessments issued by the City of Manila to GSIS on the subject properties were declared void, except that the assessment pertaining to the leased Katigbak property shall be valid if served on Manila Hotel Corporation (MHC) as the lessee with actual and beneficial use thereof. The City of Manila was permanently restrained from levying on or selling at public auction the subject properties to satisfy the payment of real property tax delinquency.
Ratio Decidendi
On the issue of GSIS's exemption from real property tax: The Court held that under its charter, Presidential Decree No. (PD) 1146, GSIS enjoyed full tax exemption. While the Local Government Code (LGC) of 1991 (RA 7160) withdrew tax exemption privileges, this exemption was restored in 1997 by RA 8291, the GSIS Act. Section 39 of RA 8291 explicitly states that GSIS, its assets, revenues, and benefits paid are exempt from all taxes, assessments, fees, charges, or duties of all kinds. The Court emphasized that these exemptions continue unless expressly and specifically revoked, and any assessment against GSIS as of the approval of RA 8291 was considered paid. Furthermore, the Court ruled that GSIS is an instrumentality of the National Government, and under Section 133(o) of the LGC, local government units cannot impose taxes on national government instrumentalities, agencies, and instrumentalities. On the issue of GSIS's liability for real property taxes on leased properties: The Court applied the "beneficial use" principle under Section 234(a) of the LGC. While GSIS, as the owner and an instrumentality, is exempt, the beneficial use of the Katigbak property was transferred to Manila Hotel Corporation (MHC), a taxable entity. Therefore, the property becomes subject to real property tax. The Court clarified that the liability for the unpaid taxes attaches to the person who had actual or beneficial use and possession of the property, regardless of ownership. In this case, MHC, as the lessee in actual possession and beneficial use since November 1991, is liable for the realty taxes assessed on the Katigbak property from 1992 to 2002. This liability is further reinforced by Stipulation 18 of the Contract of Lease, wherein MHC agreed to shoulder any tax, assessment, or levy that would constitute a charge against GSIS or create a lien against the property. On the issue of GSIS properties being exempt from levy and tax sale: The Court unequivocally stated that GSIS properties are exempt from attachment, garnishment, execution, levy, or other legal processes. This is explicitly provided in the third paragraph of Section 39 of RA 8291, which states that the funds and/or properties of GSIS, as well as benefits, sums, or monies corresponding to the benefits under the Act, shall be exempt from such processes. The legislative intent behind this exemption is to preserve the solvency of the GSIS fund and ensure the uninterrupted delivery of benefits to its members. Therefore, even if GSIS had a tax liability for the interim period (1992-1996), the subject properties could not be subjected to levy or public auction sale to satisfy such delinquency, as the governing law (RA 8291) in force at the time of the threatened levy prohibits it.
Main Doctrine
The Government Service Insurance System (GSIS), as an instrumentality of the National Government, is exempt from real property taxes. However, when the beneficial use of its property is transferred to a taxable entity, such as a lessee, the property becomes subject to real property tax, with the liability devolving upon the taxable beneficial user. GSIS properties are also exempt from levy and public auction sale.