GSIS - GSIS v. City Treasurer of Manila

11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME 609 11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME
11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME 609
VOL. 609, December 23, 2009 331
Government Service Insurance System vs. City Treasurer of the City of

Manila
process and liens but only for insurance policies and their proceeds, thus:
Section 26. Exemption from legal process and liens.—No policy of life
Petition denied, judgment affirmed with modification. 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
Notes.—“To score” means to buy in the common parlance of the
liable to attachment, garnishment, or other process, or to be seized, taken,
drug trade. (People vs. Ponsica, 230 SCRA 87 [1994])
appropriated, or applied by any legal or equitable process or operation of
A buy-bust operation is a form of entrapment whereby ways and
law to pay any debt or liability of such member, or his beneficiary, or any
means are resorted to for the purpose of trapping and capturing
other person who may have a right thereunder, either before or after
lawbreakers in the execution of their criminal plan. (People vs.
payment; nor shall the proceeds thereof, when not made payable to a
Julian-Fernandez, 372 SCRA 608 [2001])
named beneficiary, constitute a part of the estate of the member for
——o0o——
payment of his debt. x x x
Same; Taxation; It is to be noted that prominently added in
Government Service Insurance System’s (GSIS’s) present charter is a
paragraph precluding any implied repeal of the tax-exempt clause so as to
G.R. No. 186242. December 23, 2009.*
protect the solvency of GSIS funds; Restrictions in the Government Service
Insurance System (GSIS) Charter which for a future express repeal do not
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, make the proviso an irrepealable law, for such restrictions do not impinge
vs. CITY TREASURER and CITY ASSESSOR of the CITY OF or limit the carte blanche legislative authority of the legislature to so
MANILA, respondents. amend it.—The foregoing exempting proviso, couched as it were in an
encompassing manner, brooks no other construction but that GSIS is
Government Service Insurance System; Legal Research; In 1936, exempt from all forms of taxes. While not determinative of this case, it is
Commonwealth Act No. (CA) 186 was enacted abolishing the then pension to be noted that prominently added in GSIS’ present charter is a paragraph
systems under Act No. 1638, as amended, and establishing the Government precluding any implied repeal of the tax-exempt clause so as to protect the
Service Insurance System (GSIS) to manage the pension system, life and solvency of GSIS funds. Moreover, an express repeal by a subsequent law
retirement insurance, and other benefits of all government employees.—In would not suffice to affect the full exemption benefits granted the GSIS,
1936, Commonwealth Act No. (CA) 186 was enacted abolishing the then unless the following conditionalities are met: (1) The repealing clause
pension systems under Act No. 1638, as amended, and establishing the must expressly, specifically, and categorically revoke or repeal Sec. 39;
GSIS to manage the pension system, life and retirement insurance, and and (2) a provision is enacted to substitute or replace the exemption
other benefits of all government employees. Under what may be considered referred to herein as an essential factor to maintain or protect the solvency
as its first charter, the GSIS was set up as a non-stock corporation managed of the fund. These restrictions for a future express repeal, notwithstanding,
by a board of trustees. Notably, Section 26 of CA 186 provided exemption do not make the proviso an irrepealable law, for such restrictions do not
from any legal 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.
_______________
332
* THIRD DIVISION.
332 SUPREME COURT REPORTS ANNOTATED

331
Manila
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11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME 609 11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME 609
the Court held that MIAA does not qualify as a GOCC, not having been
Same; Same; While recognizing the exempt status of Government organized either as a stock corporation, its capital not being divided into
Service Insurance System (GSIS) owing to the reenactment of the full tax shares, or as a non-stock corporation because it has no members. MIAA is
exemption clause under Sec. 39 of Republic Act No. 8291 in 1997, the rather an instrumentality of the National Government and, hence, outside
ponencia in City of Davao v. RTC, Branch XII, Davao City, 467 SCRA 280 the purview of local taxation by force of Sec. 133 of the LGC providing in
(2005), appeared to have failed to take stock of and fully appreciate the context that “unless otherwise provided,” local governments cannot tax
all-embracing condoning proviso in the very same Sec. 39 which, for all national government instrumentalities. And as the Court pronounced in
intents and purposes, considered as paid “any assessment against the GSIS Manila International Airport Authority, the airport lands and buildings
as of the approval of this Act.”—While recognizing the exempt status of MIAA administers belong to the Republic of the Philippines, which makes
GSIS owing to the reenactment of the full tax exemption clause under Sec. MIAA a mere trustee of such assets. No less than the Administrative Code
39 of RA 8291 in 1997, the ponencia in City of Davao appeared to have of 1987 recognizes a scenario where a piece of land owned by the Republic
failed to take stock of and fully appreciate the all-embracing condoning is titled in the name of a department, agency, or instrumentality.
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 Same; Same; Government Service Insurance System (GSIS), as a
of this Act.” If only to stress the point, we hereby reproduce the pertinent government instrumentality, is not a taxable juridical person under Sec.
portion of said Sec. 39: SEC. 39. Exemption from Tax, Legal Process and 133(o) of the Local Government Code.—Thus read together, the provisions
Lien.—x x x Taxes imposed on the GSIS tend to impair the actuarial allow the Republic to grant the beneficial use of its property to an agency
solvency of its funds and increase the contribution rate necessary to sustain or instrumentality of the national government. Such grant does not
the benefits of this Act. Accordingly, notwithstanding, any laws to the necessarily result in the loss of the tax exemption. The tax exemption the
contrary, the GSIS, its assets, revenues including all accruals thereto, and property of the Republic or its instrumentality carries ceases only if, as
benefits paid, shall be exempt from all taxes, assessments, fees, charges stated in Sec. 234(a) of the LGC of 1991, “beneficial use thereof has been
or duties of all kinds. These exemptions shall continue unless expressly granted, for a consideration or otherwise, to a taxable person.” GSIS, as a
and specifically revoked and any assessment against the GSIS as of the government instrumentality, is not a taxable juridical person under Sec.
approval of this Act are hereby considered paid. Consequently, all laws, 133(o) of the LGC. GSIS, however, lost in a sense that status with respect
ordinances, regulations, issuances, opinions or jurisprudence contrary to or to the Katigbak property when it contracted its beneficial use to MHC,
in derogation of this provision are hereby deemed repealed, superseded and doubtless a taxable person. Thus, the real estate tax assessment of PhP
rendered ineffective and without legal force and effect. 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
Same; Same; The Court’s fairly recent ruling in Manila International property.
Airport Authority v. Court of Appeals, 495 SCRA 591 (2006), a case
likewise involving real estate tax assessments by a Metro Manila city on 334
the real properties administered by Manila International Airport Authority
(MIAA), argues for the non-tax liability of Government Service Insurance
System (GSIS) for real estate taxes.—Apart from the foregoing
consideration, the Court’s Government Service Insurance System vs. City Treasurer of the City of
Manila
333
Same; Same; The unpaid tax attaches to the property and is

VOL. 609, December 23, 2009 333 chargeable against the taxable person who had actual or beneficial use
and possession of it regardless of whether or not he is the owner.—The
Manila 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
fairly recent ruling in Manila International Airport Authority v. Court of Testate Estate of Concordia T. Lim, “the unpaid tax attaches to the property
Appeals, 495 SCRA 591 (2006), a case likewise involving real estate tax and is chargeable against the taxable person who had actual or beneficial
assessments by a Metro Manila city on the real properties administered by use and possession of it regardless of whether or not he is the owner.” Of
MIAA, argues for the non-tax liability of GSIS for real estate taxes. There,
the same tenor is the Court’s holding in the subsequent Manila Electric prohibits it. And in the final analysis, the proscription against the levy
Company v. Barlis, 357 SCRA 832 (2001) and later in Republic v. City of extends to the leased Katigbak property, the beneficial use doctrine,
Kidapawan, 477 SCRA 324 (2005). Actual use refers to the purpose for notwithstanding.
which the property is principally or predominantly utilized by the person in
possession thereof. Being in possession and having actual use of the PETITION for review on certiorari of the decision and order of the
Katigbak property since November 1991, MHC is liable for the realty taxes Regional Trial Court of Manila, Br. 49.
assessed over the Katigbak property from 1992 to 2002. The facts are stated in the opinion of the Court.
GSIS Law Office for petitioner.
Same; Same; A valid tax levy presupposes a corresponding tax
Office of the City Legal Officer for respondents.
liability; Even granting arguendo that Government Service Insurance
System’s (GSIS’s) liability for realty taxes attached from 1992, when VELASCO, JR., J.:
Republic Act No. 7160 effectively lifted its tax exemption under
Presidential Decree Nos. 1146 to 1996, when Republic Act No. 8291 The Case
restored the tax incentive, the levy on the subject properties to answer for
the assessed realty tax delinquencies cannot still be sustained for the For review under Rule 45 of the Rules of Court on pure question
simple reason that the governing law, Republic Act No. 8291, in force at of law are the November 15, 2007 Decision1 and January 7, 2009
the time of the levy prohibits it.—In light of the foregoing disquisition, the Order2 of the Regional Trial Court (RTC), Branch 49 in Manila, in
issue of the propriety of the threatened levy of subject properties by the Civil Case No. 02-104827, a suit to
City of Manila to answer for the demanded realty tax deficiency is now
moot and academic. A valid tax levy presupposes a corresponding tax _______________
liability. Nonetheless, it will not be remiss to note that it is without doubt
that the subject GSIS properties are exempt from any attachment, 1 Rollo, pp. 29-38. Penned by Judge Concepcion S. Alarcon-Vergara.
garnishment, execution, levy, or other legal processes. This is the clear 2 Id., at p. 39.
import of the third paragraph of Sec. 39, RA 8291, which we quote anew
336
for clarity: x x x The Court would not be indulging in pure speculative
exercise to say that the underlying legislative intent behind the above ex-
335
Government Service Insurance System vs. City Treasurer of the
City of Manila
VOL. 609, December 23, 2009 335
nullify the assessment of real property taxes on certain properties
Government Service Insurance System vs. City Treasurer of the City of belonging to petitioner Government Service Insurance System
Manila
(GSIS).
empting proviso cannot be other than to isolate GSIS funds and properties The Facts
from legal processes that will either impair the solvency of its fund or
hamper its operation that would ultimately require an increase in the Petitioner GSIS owns or used to own two (2) parcels of land,
contribution rate necessary to sustain the benefits of the system. one located at Katigbak 25th St., Bonifacio Drive, Manila
Throughout GSIS’ life under three different charters, the need to ensure the (Katigbak property), and the other, at Concepcion cor. Arroceros
solvency of GSIS fund has always been a legislative concern, a concern Sts., also in Manila (Concepcion-Arroceros property). Title to the
expressed in the tax-exempting provisions. Thus, even granting arguendo Concepcion-Arroceros property was transferred to this Court in
that GSIS’ liability for realty taxes attached from 1992, when RA 7160 2005 pursuant to Proclamation No. 8353 dated April 27, 2005. Both
effectively lifted its tax exemption under PD 1146, to 1996, when RA 8291 the GSIS and the Metropolitan Trial Court (MeTC) of Manila
restored the tax incentive, the levy on the subject properties to answer for occupy the Concepcion-Arroceros property, while the Katigbak
the assessed realty tax delinquencies cannot still be sustained. The simple property was under lease.
reason: The governing law, RA 8291, in force at the time of the levy The controversy started when the City Treasurer of Manila
addressed a letter4 dated September 13, 2002 to GSIS President and
General Manager Winston F. Garcia informing him of the unpaid By Decision of November 15, 2007, the RTC dismissed GSIS’
real property taxes due on the aforementioned properties for years petition, as follows:
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 “WHEREFORE, in view of the foregoing, judgment is hereby rendered,
Concepcion-Arroceros property. The letter warned of the inclusion DISMISSING the petition for lack of merit, and declaring the assessment
of the subject properties in the scheduled October 30, 2002 public conducted by the respondents City of Manila on the subject real properties
auction of all delinquent properties in Manila should the unpaid of GSIS as valid pursuant to law.
taxes remain unsettled before that date. SO ORDERED.”9
On September 16, 2002, the City Treasurer of Manila issued
separate Notices of Realty Tax Delinquency5 for the _______________
6 Id., at pp. 56-62.

_______________
7 Id., at pp. 63-76, dated October 7, 2002.
3 Id., at pp. 51-52, entitled “Amending Proclamation No. 78 dated October 13, 8 Id., at pp. 77-90.
1954 by Transferring the Property Housing the Former Offices of the [GSIS] to the 9 Id., at p. 38.
Supreme Court of the Philippines, Reserving the Same for the City of Manila Hall of
338
Justice.”
4 Id., at pp. 40-41.
5 Id., at pp. 53, 54-55. 338 SUPREME COURT REPORTS ANNOTATED
337
City of Manila
VOL. 609, December 23, 2009 337 GSIS sought but was denied reconsideration per the assailed Order
Government Service Insurance System vs. City Treasurer of the dated January 7, 2009.
City of Manila Thus, the instant petition for review on pure question of law.
The Issues
subject properties, with the usual warning of seizure and/or sale. On
October 8, 2002, GSIS, through its legal counsel, wrote back 1. Whether petitioner is exempt from the payment of real
emphasizing the GSIS’ exemption from all kinds of taxes, property taxes from 1992 to 2002;
including realty taxes, under Republic Act No. (RA) 8291.6 2. Whether petitioner is exempt from the payment of real
Two days after, GSIS filed a petition for certiorari and property taxes on the property it leased to a taxable entity; and
prohibition7 with prayer for a restraining and injunctive relief 3. Whether petitioner’s real properties are exempt from
before the Manila RTC. In it, GSIS prayed for the nullification of warrants of levy and from tax sale for non-payment of real property
the assessments thus made and that respondents City of Manila taxes.10
officials be permanently enjoined from proceedings against GSIS’
property. GSIS would later amend its petition8 to include the fact The Court’s Ruling
that: (a) the Katigbak property, covered by TCT Nos. 117685 and
119465 in the name of GSIS, has, since November 1991, been The issues raised may be formulated in the following wise: first,
leased to and occupied by the Manila Hotel Corporation (MHC), whether GSIS under its charter is exempt from real property
which has contractually bound itself to pay any realty taxes that taxation; second, assuming that it is so exempt, whether GSIS is
may be imposed on the subject property; and (b) the Concepcion- liable for real property taxes for its properties leased to a taxable
Arroceros property is partly occupied by GSIS and partly occupied entity; and third, whether the properties of GSIS are exempt from
by the MeTC of Manila. levy.
In the main, it is petitioner’s posture that both its old charter,
The Ruling of the RTC 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, 11 Entitled “An Act to Create and Establish a ‘Government Service Insurance
respondents counter that GSIS may not successfully resist the city’s System,’ to Provide for Its Administration, and to Appropriate the Necessary Funds
notices and warrants of levy on the basis of its exemption under RA Therefor.”
8291, real property taxation being governed by
340
_______________
10 Id., at p. 11.
339 City of Manila
VOL. 609, December 23, 2009 339 In 1977, PD 1146,12 otherwise known as the Revised
Government Service Insurance Act of 1977, was issued, providing
Government Service Insurance System vs. City Treasurer of the for an expanded insurance system for government employees. Sec.
City of Manila 33 of PD 1146 provided for a new tax treatment for GSIS, thus:
RA 7160 or the Local Government Code of 1991 (LGC, “Section 33. Exemption from Tax, Legal Process and Lien.—It is
hereinafter). hereby declared to be the policy of the State that the actuarial solvency of
The petition is meritorious. 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
First Core Issue: GSIS Exempt from Real Property Tax 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
Full tax exemption granted through PD 1146 impair the actuarial solvency of its funds and increase the contribution rate
In 1936, Commonwealth Act No. (CA) 18611 was enacted necessary to sustain the benefits under this Act. Accordingly,
abolishing the then pension systems under Act No. 1638, as notwithstanding any laws to the contrary, the System, its assets, revenues
amended, and establishing the GSIS to manage the pension system, including all accruals thereto, and benefits paid, shall be exempt from
life and retirement insurance, and other benefits of all government all taxes, assessments, fees, charges or duties of all kinds. These
employees. Under what may be considered as its first charter, the exemptions shall continue unless expressly and specifically revoked and
GSIS was set up as a non-stock corporation managed by a board of any assessment against the System as of the approval of this Act are hereby
trustees. Notably, Section 26 of CA 186 provided exemption from considered paid.
any legal process and liens but only for insurance policies and their The benefits granted under this Act shall not be subject, among others,
proceeds, thus: to attachment, garnishment, levy or other processes. This, however, shall
not apply to obligations of the member to the System, or to the employer,
“Section 26. Exemption from legal process and liens.—No policy of
or when the benefits granted herein are assigned by the member with the
life insurance issued under this Act, or the proceeds thereof, when paid to
authority of the System.” (Emphasis ours.)
any member thereunder, nor any other benefit granted under this Act, shall
be liable to attachment, garnishment, or other process, or to be seized, A scrutiny of PD 1146 reveals that the non-stock corporate
taken, appropriated, or applied by any legal or equitable process or structure of GSIS, as established under CA 186, re-
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 12 Entitled “Amending, Expanding, Increasing and Integrating the Social
member for payment of his debt. x x x” 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.
341

VOL. 609, December 23, 2009 341 From the foregoing provisos, there can be no serious doubt
Government Service Insurance System vs. City Treasurer of the about the Congress’ intention to withdraw, subject to certain
City of Manila 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
mained unchanged. Sec. 3413 of PD 1146 pertinently provides that
1146, particular insofar as realty tax is concerned, was deemed
the GSIS, as created by CA 186, shall implement the provisions of
withdrawn. We answer in the affirmative.
PD 1146.
In Mactan Cebu International Airport Authority v. Marcos,15 the
RA 7160 lifted GSIS tax exemption
Court held that the express withdrawal by the LGC of previously
Then came the enactment in 1991 of the LGC or RA 7160,
granted exemptions from realty taxes applied to instrumentalities
providing the exercise of local government units (LGUs) of their
and government-owned and controlled corporations (GOCCs), such
power to tax, the scope and limitations thereof,14 and the
as the Mactan-Cebu International Airport Authority. In City of
exemptions from taxations. Of particular pertinence is the general
Davao v. RTC, Branch XII, Davao City,16 the Court, citing Mactan
provision on withdrawal of tax exemption privileges in Sec. 193 of
Cebu International Airport Authority, declared the GSIS liable for
the LGC, and the special provision on withdrawal of exemption
real property taxes for the years 1992 to 1994 (contested real estate
from payment of real property taxes in the last paragraph of the
tax assessment therein), its previous exemption under PD 1146
succeeding Sec. 234, thus:
being considered withdrawn with the enactment of the LGC in
“SEC. 193. Withdrawal of Tax Exemption Privileges.—Unless 1991.
otherwise provided in this Code, tax exemptions or incentives granted to, Significantly, the Court, in City of Davao, stated the observation
or presently enjoyed by all persons, whether natural or juridical, including that the GSIS’ tax-exempt status withdrawn in 1992 by the LGC
government-owned or -controlled corporations, except local water districts, was restored in 1997 by RA 8291.17
cooperatives duly registered under R.A. No. 6938, non-stock and non- Full tax exemption reenacted through RA 8291
profit hospitals and educational institutions, are hereby withdrawn upon the Indeed, almost 20 years to the day after the issuance of the GSIS
effectivity of this Code. charter, i.e., PD 1146, it was further amended and expanded by RA
SEC. 234. Exemption from Real Property Tax.—x x x Except as 8291 which took effect on June 24,
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-
15 G.R. No. 120082, September 11, 1996, 261 SCRA 667.
16 G.R. No. 127383, 18 August 2005, 467 SCRA 280.
_______________
17 Id., at p. 299.
13 Section 34. Implementing Body.––The Government Service Insurance System as
343
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 VOL. 609, December 23, 2009 343
levy of taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and LGUs.
City of Manila
342
1997.18 Under it, the full tax exemption privilege of GSIS was
342 SUPREME COURT REPORTS ANNOTATED restored, the operative provision being Sec. 39 thereof, a virtual
replication of the earlier quoted Sec. 33 of PD 1146. Sec. 39 of RA
Manila 8291 reads:
“SEC. 39. Exemption from Tax, Legal Process and Lien.—It is

owned or controlled corporation are hereby withdrawn upon the effectivity hereby declared to be the policy of the State that the actuarial solvency of
of this Code.” 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 case, it is to be noted that prominently added in GSIS’ present
be kept as low as possible in order not to burden the members of the GSIS charter is a paragraph precluding any implied repeal of the tax-
and their employers. Taxes imposed on the GSIS tend to impair the exempt clause so as to protect the solvency of GSIS funds.
actuarial solvency of its funds and increase the contribution rate necessary Moreover, an express repeal by a subsequent law would not suffice
to sustain the benefits of this Act. Accordingly, notwithstanding, any laws to affect the full exemption benefits granted the GSIS, unless the
to the contrary, the GSIS, its assets, revenues including all accruals following conditionalities are met: (1) The repealing clause must
thereto, and benefits paid, shall be exempt from all taxes, assessments, expressly, specifically, and categorically revoke or repeal Sec.
fees, charges or duties of all kinds. These exemptions shall continue 39; and (2) a provision is enacted to substitute or replace the
unless expressly and specifically revoked and any assessment against exemption referred to herein as an essential factor to maintain or
the GSIS as of the approval of this Act are hereby considered paid. protect the solvency of the fund. These restrictions for a future
Consequently, all laws, ordinances, regulations, issuances, opinions or express repeal, notwithstanding, do not make the proviso an
jurisprudence contrary to or in derogation of this provision are hereby irrepealable law, for such restrictions do not impinge or limit the
deemed repealed, superseded and rendered ineffective and without legal carte blanche legislative authority of the legislature to so amend it.
force and effect. The restrictions merely enhance other provisos in the law ensuring
Moreover, these exemptions shall not be affected by subsequent laws the solvency of the GSIS fund.
to the contrary unless this section is expressly, specifically and Given the foregoing perspectives, the following may be
categorically revoked or repealed by law and a provision is enacted to assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax
substitute or replace the exemption referred to herein as an essential exemption from real estate taxes, among other tax
factor to maintain or protect the solvency of the fund, notwithstanding
and independently of the guaranty of the national government to secure 345
such solvency or liability.

VOL. 609, December 23, 2009 345
_______________
18 After its publication in the June 9, 1997 issue of the Philippine Star. City of Manila
344
burdens, until January 1, 1992 when the LGC took effect and
withdrew exemptions from payment of real estate taxes privileges
344 SUPREME COURT REPORTS ANNOTATED granted under PD 1146; (2) RA 8291 restored in 1997 the tax
Government Service Insurance System vs. City Treasurer of the City of exempt status of GSIS by reenacting under its Sec. 39 what was
Manila 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
The funds and/or the properties referred to herein as well as the interim period, or from 1992 to 1996, to be precise.
benefits, sums or monies corresponding to the benefits under this Act Real property taxes assessed and due from GSIS considered
shall be exempt from attachment, garnishment, execution, levy or paid
other processes issued by the courts, quasi-judicial agencies or While recognizing the exempt status of GSIS owing to the
administrative bodies including Commission on Audit (COA) reenactment of the full tax exemption clause under Sec. 39 of RA
disallowances and from all financial obligations of the members, including 8291 in 1997, the ponencia in City of Davao appeared to have
his pecuniary accountability arising from or caused or occasioned by his failed to take stock of and fully appreciate the all-embracing
exercise or performance of his official functions or duties, or incurred condoning proviso in the very same Sec. 39 which, for all intents
relative to or in connection with his position or work except when his and purposes, considered as paid “any assessment against the
monetary liability, contractual or otherwise, is in favor of the GSIS.” GSIS as of the approval of this Act.” If only to stress the point,
(Emphasis ours.) we hereby reproduce the pertinent portion of said Sec. 39:
The foregoing exempting proviso, couched as it were in an “SEC. 39. Exemption from Tax, Legal Process and Lien.—x x x
encompassing manner, brooks no other construction but that GSIS Taxes imposed on the GSIS tend to impair the actuarial solvency of its
is exempt from all forms of taxes. While not determinative of this funds and increase the contribution rate necessary to sustain the benefits of
this Act. Accordingly, notwithstanding, any laws to the contrary, the GSIS, deed of conveyance shall be executed in behalf of the government by the
its assets, revenues including all accruals thereto, and benefits paid, shall following: x x x x
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, 20 G.R. No. 155650, July 20, 2006, 495 SCRA 591.
regulations, issuances, opinions or jurisprudence contrary to or in 347

derogation of this provi-
VOL. 609, December 23, 2009 347

_______________
19 City of Davao, supra note 16. Manila
346
(2) For property belonging to the Republic of the Philippines, but
titled in the name of x x x any corporate agency or instrumentality, by the
346 SUPREME COURT REPORTS ANNOTATED executive head of the agency or instrumentality.”21
Manila While perhaps not of governing sway in all fours inasmuch as
what were involved in Manila International Airport Authority, e.g.,
sion are hereby deemed repealed, superseded and rendered ineffective and airfields and runways, are properties of the public dominion and,
without legal force and effect.” (Emphasis added.) hence, outside the commerce of man, the rationale underpinning the
disposition in that case is squarely applicable to GSIS, both MIAA
GSIS an instrumentality of the National Government and GSIS being similarly situated. First, while created under CA
Apart from the foregoing consideration, the Court’s fairly recent 186 as a non-stock corporation, a status that has remained
ruling in Manila International Airport Authority v. Court of unchanged even when it operated under PD 1146 and RA 8291,
Appeals,20 a case likewise involving real estate tax assessments by GSIS is not, in the context of the aforequoted Sec. 193 of the LGC,
a Metro Manila city on the real properties administered by MIAA, a GOCC following the teaching of Manila International Airport
argues for the non-tax liability of GSIS for real estate taxes. There, Authority, for, like MIAA, GSIS’ capital is not divided into unit
the Court held that MIAA does not qualify as a GOCC, not having shares. Also, GSIS has no members to speak of. And by members,
been organized either as a stock corporation, its capital not being the reference is to those who, under Sec. 87 of the Corporation
divided into shares, or as a non-stock corporation because it has no Code, make up the non-stock corporation, and not to the
members. MIAA is rather an instrumentality of the National compulsory members of the system who are government
Government and, hence, outside the purview of local taxation by employees. Its management is entrusted to a Board of Trustees
force of Sec. 133 of the LGC providing in context that “unless whose members are appointed by the President.
otherwise provided,” local governments cannot tax national Second, the subject properties under GSIS’s name are likewise
government instrumentalities. And as the Court pronounced in owned by the Republic. The GSIS is but a mere trustee of the
Manila International Airport Authority, the airport lands and subject properties which have either been ceded to it by the
buildings MIAA administers belong to the Republic of the Government or acquired for the enhancement of the system. This
Philippines, which makes MIAA a mere trustee of such assets. No particular property arrangement is clearly shown by the fact that the
less than the Administrative Code of 1987 recognizes a scenario disposal or conveyance of said subject properties are either done by
where a piece of land owned by the Republic is titled in the name or through the authority of the President of the Philippines.
of a department, agency, or instrumentality. The following Specifically, in the case of the Concepcion-Arroceros prop-
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 21 Chapter 12, Book I.

348 Second Core Issue: Beneficial Use Doctrine Applicable
The foregoing notwithstanding, the leased Katigbak property

348 SUPREME COURT REPORTS ANNOTATED shall be taxable pursuant to the “beneficial use” principle under
Government Service Insurance System vs. City Treasurer of the Sec. 234(a) of the LGC.
City of Manila It is true that said Sec. 234(a), quoted below, exempts from real
estate taxes real property owned by the Republic, unless the
erty, it was transferred, conveyed, and ceded to this Court on April beneficial use of the property is, for consideration, transferred to a
27, 2005 through a presidential proclamation, Proclamation No. taxable person.
835. Pertinently, the text of the proclamation announces that the “SEC. 234. Exemptions from Real Property Tax.—The following are
Concepcion-Arroceros property was earlier ceded to the GSIS on exempted from payment of the real property tax:
October 13, 1954 pursuant to Proclamation No. 78 for office (a) Real property owned by the Republic of the Philippines or any
purposes and had since been titled to GSIS which constructed an of its political subdivisions except when the beneficial use thereof has
office building thereon. Thus, the transfer on April 27, 2005 of the been granted, for consideration or otherwise, to a taxable person.”
Concepcion-Arroceros property to this Court by the President
through Proclamation No. 835. This illustrates the nature of the This exemption, however, must be read in relation with Sec.
government ownership of the subject GSIS properties, as 133(o) of the LGC, which prohibits LGUs from impos-
indubitably shown in the last clause of Presidential Proclamation
No. 835: _______________
“WHEREAS, by virtue of the Public Land Act (Commonwealth Act
22 Section 24. Accounts to be maintained.—The System shall keep separate
No. 141, as amended), Presidential Decree No. 1455, and the
and distinct from one another the following funds:
Administrative Code of 1987, the President is authorized to transfer any
(a) x x x x
government property that is no longer needed by the agency to which
The Government of the Republic of the Philippines hereby guarantees the
it belongs to other branches or agencies of the government.” (Emphasis
fulfillment of the obligations of the [GSIS] to the members thereof when and as they
ours.)
shall become due.
23 Section 8. Government Guarantee.––The Government of the Republic of
Third, GSIS manages the funds for the life insurance,
the Philippines hereby guarantees the fulfillment of the obligations of the System to
retirement, survivorship, and disability benefits of all government
its members as and when they fall due.
employees and their beneficiaries. This undertaking, to be sure,
24 SEC. 8. Government Guarantee.—The government of the Republic of the
constitutes an essential and vital function which the government,
Philippines hereby guarantees the fulfillment of the obligations of the GSIS to its
through one of its agencies or instrumentalities, ought to perform if
members as and when they fall due.
social security services to civil service employees are to be
delivered with reasonable dispatch. It is no wonder, therefore, that 350
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 350 SUPREME COURT REPORTS ANNOTATED
349
City of Manila
VOL. 609, December 23, 2009 349 ing taxes or fees of any kind on the national government, its
Government Service Insurance System vs. City Treasurer of the agencies, and instrumentalities:
City of Manila
“SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units.—Unless otherwise provided herein, the exercise of
first formalized under Sec. 2422 of CA 186, then Sec. 823 of PD the taxing powers of provinces, cities, municipalities, and barangays
1146, and finally in Sec. 824 of RA 8291. shall not extend to the levy of the following:
xxxx “18. By law, the Lessor, [GSIS], is exempt from taxes, assessments
(o) Taxes, fees or charges of any kinds on the National and levies. Should there be any change in the law or the interpretation
Government, its agencies and instrumentalities, and local government thereof or any other circumstances which would subject the Leased
units.” (Emphasis supplied.) 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
Thus read together, the provisions allow the Republic to grant Lessee agrees and obligates itself to shoulder and pay such tax,
the beneficial use of its property to an agency or instrumentality of assessment or levy as it becomes due.”28 (Emphasis ours.)
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 25 G.R. No. 114231, May 18, 2001, 357 SCRA 832 and June 29, 2004, 433
granted, for a consideration or otherwise, to a taxable person.” SCRA 11.
GSIS, as a government instrumentality, is not a taxable juridical 26 G.R. No. 166651, December 9, 2005, 477 SCRA 324.
person under Sec. 133(o) of the LGC. GSIS, however, lost in a 27 Id., at pp. 333-334; citing Local Government Code, Sec. 199(b).
sense that status with respect to the Katigbak property when it 28 Rollo, p. 48.
contracted its beneficial use to MHC, doubtless a taxable person.
Thus, the real estate tax assessment of PhP 54,826,599.37 covering 352
1992 to 2002 over the subject Katigbak property is valid insofar as
said tax delinquency is concerned as assessed over said property. 352 SUPREME COURT REPORTS ANNOTATED
Taxable entity having beneficial use of leased
property liable for real property taxes thereon Government Service Insurance System vs. City Treasurer of the
The next query as to which between GSIS, as the owner of the City of Manila
Katigbak property, or MHC, as the lessee thereof, is
As a matter of law and contract, therefore, MHC stands liable to
351 pay the realty taxes due on the Katigbak property. Considering,
however, that MHC has not been impleaded in the instant case, the
VOL. 609, December 23, 2009 351 remedy of the City of Manila is to serve the realty tax assessment
covering the subject Katigbak property to MHC and to pursue other
available remedies in case of nonpayment, for said property cannot
City of Manila
be levied upon as shall be explained below.
liable to pay the accrued real estate tax, need not detain us long. Third Core Issue: GSIS Properties Exempt from Levy
MHC ought to pay.
As we declared in Testate Estate of Concordia T. Lim, “the In light of the foregoing disquisition, the issue of the propriety
unpaid tax attaches to the property and is chargeable against the of the threatened levy of subject properties by the City of Manila to
taxable person who had actual or beneficial use and possession of it answer for the demanded realty tax deficiency is now moot and
regardless of whether or not he is the owner.” Of the same tenor is academic. A valid tax levy presupposes a corresponding tax
the Court’s holding in the subsequent Manila Electric Company v. liability. Nonetheless, it will not be remiss to note that it is without
Barlis25 and later in Republic v. City of Kidapawan.26 Actual use doubt that the subject GSIS properties are exempt from any
refers to the purpose for which the property is principally or attachment, garnishment, execution, levy, or other legal processes.
predominantly utilized by the person in possession thereof.27 This is the clear import of the third paragraph of Sec. 39, RA 8291,
Being in possession and having actual use of the Katigbak which we quote anew for clarity:
property since November 1991, MHC is liable for the realty taxes
“SEC. 39. Exemption from Tax, Legal Process and Lien.—x x x.
assessed over the Katigbak property from 1992 to 2002.
xxxx
The foregoing is not all. As it were, MHC has obligated itself
The funds and/or the properties referred to herein as well as the
under the GSIS-MHC Contract of Lease to shoulder such
benefits, sums or monies corresponding to the benefits under this Act
assessment. Stipulation 18 of the contract pertinently reads:
shall be exempt from attachment, garnishment, execution, levy or 354

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 Government Service Insurance System vs. City Treasurer of the
exercise or performance of his official functions or duties, or incurred City of Manila
relative to or in connection with his position or work
The Katigbak property cannot in any event be subject of a public
353
auction sale, notwithstanding its realty tax delinquency. This means
that the City of Manila has to satisfy its tax claim by serving the
VOL. 609, December 23, 2009 353 accrued realty tax assessment on MHC, as the taxable beneficial
Government Service Insurance System vs. City Treasurer of the City of user of the Katigbak property and, in case of nonpayment, through
Manila means other than the sale at public auction of the leased property.
WHEREFORE, the instant petition is hereby GRANTED. The
except when his monetary liability, contractual or otherwise, is in favor of November 15, 2007 Decision and January 7, 2009 Order of the
the GSIS.” (Emphasis ours.) Regional Trial Court, Branch 49, Manila are REVERSED and SET
ASIDE. Accordingly, the real property tax assessments issued by
The Court would not be indulging in pure speculative exercise the City of Manila to the Government Service Insurance System on
to say that the underlying legislative intent behind the above the subject properties are declared VOID, except that the real
exempting proviso cannot be other than to isolate GSIS funds and property tax assessment pertaining to the leased Katigbak property
properties from legal processes that will either impair the solvency shall be valid if served on the Manila Hotel Corporation, as lessee
of its fund or hamper its operation that would ultimately require an which has actual and beneficial use thereof. The City of Manila is
increase in the contribution rate necessary to sustain the benefits of permanently restrained from levying on or selling at public auction
the system. Throughout GSIS’ life under three different charters, the subject properties to satisfy the payment of the real property tax
the need to ensure the solvency of GSIS fund has always been a delinquency.
legislative concern, a concern expressed in the tax-exempting No pronouncement as to costs.
provisions. SO ORDERED.
Thus, even granting arguendo that GSIS’ liability for realty
taxes attached from 1992, when RA 7160 effectively lifted its tax Corona (Chairperson), Nachura, Peralta and Del
exemption under PD 1146, to 1996, when RA 8291 restored the tax Castillo, JJ., concur.
incentive, the levy on the subject properties to answer for the
assessed realty tax delinquencies cannot still be sustained. The Petition granted, judgment and order reversed and set aside.
simple reason: The governing law, RA 8291, in force at the time of
the levy prohibits it. And in the final analysis, the proscription Notes.—Congress is not bound to retain the OGCC as the
against the levy extends to the leased Katigbak property, the primary or exclusive legal counsel of GSIS even if it performs such
beneficial use doctrine, notwithstanding. a role for other GOCCs—to bind Congress to perform in that
manner would be akin to elevating the
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 Manila against its Katigbak and Concepcion-Arroceros
properties. Following the “beneficial use” rule, however, accrued © Copyright 2021 Central Book Supply, Inc. All rights reserved.
real property taxes are due from the Katigbak property, leased as it
is to a taxable entity. But the corresponding liability for the
payment thereof devolves on the taxable beneficial user.
11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME 609
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11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME 609 11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME

11/26/21, 11:17 AM SUPREME COURT REPORTS ANNOTATED VOLUME 609

VOL. 609, December 23, 2009 331

Government Service Insurance System vs. City Treasurer of the City of

332 SUPREME COURT REPORTS ANNOTATED

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Same; Same; The unpaid tax attaches to the property and is

6 Id., at pp. 56-62.

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“SEC. 39. Exemption from Tax, Legal Process and Lien.—It is

such solvency or liability.

regulations, issuances, opinions or jurisprudence contrary to or in 347

VOL. 609, December 23, 2009 347

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348 Second Core Issue: Beneficial Use Doctrine Applicable

The foregoing notwithstanding, the leased Katigbak property

shall be exempt from attachment, garnishment, execution, levy or 354

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