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186242

RepublicofthePhilippines
SUPREMECOURT
Manila


THIRDDIVISION

GOVERNMENTSERVICE G.R.No.186242
INSURANCESYSTEM,
Petitioner, Present:

CORONA,J.,Chairperson,
VELASCO,JR.,
versus NACHURA,
PERALTA,and

DELCASTILLO,*JJ.
CITYTREASURERandCITY
ASSESSORoftheCITYOF Promulgated:
MANILA,
Respondents. December23,2009
xx

DECISION
VELASCO,JR.,J.:
TheCase

ForreviewunderRule45oftheRulesofCourtonpurequestionoflawaretheNovember15,
[1] [2]
2007 Decision and January 7, 2009 Order of the Regional Trial Court (RTC), Branch 49 in
Manila, in Civil Case No. 02104827, a suit to nullify the assessment of real property taxes on
certainpropertiesbelongingtopetitionerGovernmentServiceInsuranceSystem(GSIS).




TheFacts

PetitionerGSISownsorusedtoowntwo(2)parcelsofland,onelocatedatKatigbak25thSt.,
BonifacioDrive,Manila(Katigbakproperty),andtheother,atConcepcioncor.ArrocerosSts.,also
in Manila (ConcepcionArroceros property). Title to the ConcepcionArroceros property was

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[3]
transferredtothisCourtin2005pursuanttoProclamationNo.835 datedApril27,2005.Boththe
GSIS and the Metropolitan Trial Court (MeTC) of Manila occupy the ConcepcionArroceros
property,whiletheKatigbakpropertywasunderlease.

[4]
The controversy started when the City Treasurer of Manila addressed a letter dated
September13,2002toGSISPresidentandGeneralManagerWinstonF.Garciainforminghimof
theunpaidrealpropertytaxesdueontheaforementionedpropertiesforyears1992to2002,broken
downasfollows:(a)PhP54,826,599.37fortheKatigbakpropertyand(b)PhP48,498,917.01for
theConcepcionArrocerosproperty.Theletterwarnedoftheinclusionofthesubjectpropertiesin
the scheduled October 30, 2002 public auction of all delinquent properties in Manila should the
unpaidtaxesremainunsettledbeforethatdate.

OnSeptember16,2002,theCityTreasurerofManilaissuedseparateNoticesofRealtyTax
[5]
Delinquency forthesubjectproperties,withtheusualwarningofseizureand/orsale.OnOctober
8, 2002, GSIS, through its legal counsel, wrote back emphasizing the GSIS exemption from all
[6]
kindsoftaxes,includingrealtytaxes,underRepublicActNo.(RA)8291.


[7]
Two days after, GSIS filed a petition for certiorari and prohibition with prayer for a
restrainingandinjunctivereliefbeforetheManilaRTC.Init,GSISprayedforthenullificationof
the assessments thus made and that respondents City of Manila officials be permanently enjoined
[8]
fromproceedingsagainstGSISproperty.GSISwouldlateramenditspetition toincludethefact
that:(a)theKatigbakproperty,coveredbyTCTNos.117685and119465inthenameofGSIS,has,
sinceNovember1991,beenleasedtoandoccupiedbytheManilaHotelCorporation(MHC),which
hascontractuallybounditselftopayanyrealtytaxesthatmaybeimposedonthesubjectproperty
and(b)theConcepcionArrocerospropertyispartlyoccupiedbyGSISandpartlyoccupiedbythe
MeTCofManila.

TheRulingoftheRTC

ByDecisionofNovember15,2007,theRTCdismissedGSISpetition,asfollows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered, DISMISSING the
petitionforlackofmerit,anddeclaringtheassessmentconductedbytherespondentsCityofManila
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onthesubjectrealpropertiesofGSISasvalidpursuanttolaw.
[9]
SOORDERED.


GSISsoughtbutwasdeniedreconsiderationpertheassailedOrderdatedJanuary7,2009.

Thus,theinstantpetitionforreviewonpurequestionoflaw.





TheIssues

1.Whetherpetitionerisexemptfromthepaymentofrealpropertytaxesfrom1992to2002
2.Whetherpetitionerisexemptfromthepaymentofrealpropertytaxesonthepropertyitleasedtoa
taxableentityand

3.Whether petitioners real properties are exempt from warrants of levy and from tax sale for non
[10]
paymentofrealpropertytaxes.


TheCourtsRuling

The issues raised may be formulated in the following wise: first, whether GSIS under its
charterisexemptfromrealpropertytaxationsecond,assumingthatitissoexempt,whetherGSISis
liable for real property taxes for its properties leased to a taxable entity and third, whether the
propertiesofGSISareexemptfromlevy.

In the main, it is petitioners posture that both its old charter, Presidential Decree No. (PD)
1146,andpresentcharter,RA8291ortheGSISActof1997,exempttheagencyanditsproperties
fromallformsoftaxesandassessments,inclusiveofrealtytax.Excepting,respondentscounterthat
GSISmaynotsuccessfullyresistthecitysnoticesandwarrantsoflevyonthebasisofitsexemption
underRA8291,realpropertytaxationbeinggovernedbyRA7160ortheLocalGovernmentCode
of1991(LGC,hereinafter).

Thepetitionismeritorious.


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FirstCoreIssue:GSISExemptfromRealPropertyTax

FulltaxexemptiongrantedthroughPD1146


[11]
In 1936, Commonwealth Act No. (CA) 186 was enacted abolishing the then pension
systemsunderActNo.1638,asamended,andestablishingtheGSIStomanagethepensionsystem,
lifeandretirementinsurance,andotherbenefitsofallgovernmentemployees.Underwhatmaybe
consideredasitsfirstcharter,theGSISwassetupasanonstockcorporationmanagedbyaboardof
trustees.Notably, Section 26 of CA 186 provided exemption from any legal process and liens but
onlyforinsurancepoliciesandtheirproceeds,thus:

Section26.Exemptionfromlegalprocessandliens.Nopolicyoflifeinsuranceissuedunder
thisAct,ortheproceedsthereof,whenpaidtoanymemberthereunder,noranyotherbenefitgranted
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,constituteapartoftheestateofthememberforpaymentofhisdebt.xxx

[12]
In1977,PD1146, otherwiseknownastheRevisedGovernmentServiceInsuranceActof
1977,wasissued,providingforanexpandedinsurancesystemforgovernmentemployees.Sec. 33
ofPD1146providedforanewtaxtreatmentforGSIS,thus:

Section33.ExemptionfromTax,LegalProcessandLien.Itisherebydeclaredtobethepolicy
oftheStatethattheactuarialsolvencyofthefundsoftheSystemshallbepreservedandmaintainedat
alltimesandthatthecontributionratesnecessarytosustainthebenefitsunderthisActshallbekeptas
low as possible in order not to burden the members of the System and/or their employees. Taxes
imposedontheSystemtendtoimpairtheactuarialsolvencyofitsfundsandincreasethecontribution
rate necessary to sustain the benefits under this Act. Accordingly, notwithstanding any laws to the
contrary,theSystem,itsassets,revenuesincludingallaccrualsthereto,andbenefitspaid,shallbe
exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall
continueunlessexpresslyandspecificallyrevokedandanyassessmentagainsttheSystemasofthe
approvalofthisActareherebyconsideredpaid.
The benefits granted under this Act shall not be subject, among others, to attachment,
garnishment,levyorotherprocesses.This,however,shallnotapplytoobligationsofthememberto
theSystem,ortotheemployer,orwhenthebenefitsgrantedhereinareassignedbythememberwith
theauthorityoftheSystem.(Emphasisours.)


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AscrutinyofPD1146revealsthatthenonstockcorporatestructureofGSIS,asestablished
[13]
underCA186,remainedunchanged.Sec.34 ofPD1146pertinentlyprovidesthattheGSIS,as
createdbyCA186,shallimplementtheprovisionsofPD1146.

RA7160liftedGSIStaxexemption


Then came the enactment in 1991 of the LGC or RA 7160, providing the exercise of local
[14]
government units (LGUs) of their power to tax, the scope and limitations thereof, and the
exemptions from taxations. Of particular pertinence is the general provision on withdrawal of tax
exemptionprivilegesinSec.193oftheLGC,andthespecialprovisiononwithdrawalofexemption
frompaymentofrealpropertytaxesinthelastparagraphofthesucceedingSec.234,thus:

SEC.193.WithdrawalofTaxExemptionPrivileges.Unlessotherwiseprovided in this Code,
tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including governmentowned or controlled corporations, except local water districts,
cooperativesdulyregisteredunderR.A.No.6938,nonstockandnonprofithospitalsandeducational
institutions,areherebywithdrawnupontheeffectivityofthisCode.

SEC.234.ExemptionfromRealPropertyTax.xxxExceptasprovidedherein,anyexemption
frompaymentofrealpropertytaxpreviouslygrantedto,orpresentlyenjoyedby,allpersons,whether
naturalorjuridical,includingallgovernmentownedorcontrolledcorporationareherebywithdrawn
upontheeffectivityofthisCode.
From the foregoing provisos, there can be no serious doubt about the Congress intention to
withdraw,subjecttocertaindefinedexceptions,taxexemptionsgrantedpriortothepassageofRA
7160. The question that easily comes to mind then is whether or not the full tax exemption
heretoforegrantedtoGSISunderPD1146,particularinsofarasrealtytaxisconcerned,wasdeemed
withdrawn.Weanswerintheaffirmative.

[15]
InMactanCebuInternationalAirportAuthorityv.Marcos, theCourtheldthattheexpress
withdrawal by the LGC of previously granted exemptions from realty taxes applied to
instrumentalitiesandgovernmentownedandcontrolledcorporations(GOCCs),suchastheMactan
[16]
Cebu International Airport Authority. In City of Davao v. RTC, Branch XII, Davao City, the
Court, citing Mactan Cebu International Airport Authority, declared the GSIS liable for real
propertytaxesfortheyears1992to1994(contestedrealestatetaxassessmenttherein),itsprevious
exemptionunderPD1146beingconsideredwithdrawnwiththeenactmentoftheLGCin1991.

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Significantly, the Court, in City of Davao, stated the observation that the GSIS taxexempt
[17]
statuswithdrawnin1992bytheLGCwasrestoredin1997byRA8291.

FulltaxexemptionreenactedthroughRA8291


Indeed,almost20yearstothedayaftertheissuanceoftheGSIScharter,i.e.,PD1146,itwas
[18]
furtheramendedandexpandedbyRA8291whichtookeffectonJune24,1997. Under it, the
fulltaxexemptionprivilegeofGSISwasrestored,theoperativeprovisionbeingSec.39thereof,a
virtualreplicationoftheearlierquotedSec.33ofPD1146.Sec.39ofRA8291reads:
SEC.39.ExemptionfromTax,LegalProcessandLien.Itisherebydeclaredtobethepolicyof
theStatethattheactuarialsolvencyofthefundsoftheGSISshallbepreservedandmaintainedatall
timesandthatcontributionratesnecessarytosustainthebenefitsunderthisActshallbekeptaslowas
possibleinordernottoburdenthemembersoftheGSISandtheiremployers.Taxesimposedonthe
GSIStendtoimpairtheactuarialsolvencyofitsfundsandincreasethecontributionratenecessaryto
sustainthebenefitsofthisAct.Accordingly,notwithstanding,anylawstothecontrary,theGSIS,its
assets,revenuesincludingallaccrualsthereto,andbenefitspaid,shallbeexemptfromalltaxes,
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,
opinionsorjurisprudencecontrarytoorinderogationofthisprovisionareherebydeemedrepealed,
supersededandrenderedineffectiveandwithoutlegalforceandeffect.
Moreover, these exemptions shall not be affected by subsequent laws to the contrary
unlessthissectionisexpressly,specificallyandcategoricallyrevokedorrepealedbylawanda
provision is enacted to substitute or replace the exemption referred to herein as an essential
factortomaintainorprotectthesolvencyofthefund, notwithstanding and independently of the
guarantyofthenationalgovernmenttosecuresuchsolvencyorliability.
Thefundsand/orthepropertiesreferredtohereinaswellasthebenefits,sumsormonies
corresponding to the benefits under this Act shall be exempt from attachment, garnishment,
execution,levyorotherprocessesissuedbythecourts,quasijudicialagenciesoradministrative
bodiesincludingCommissiononAudit(COA)disallowancesandfromallfinancialobligationsofthe
members,includinghispecuniaryaccountabilityarisingfromorcausedoroccasionedbyhisexercise
or performance of his official functions or duties, or incurred relative to or in connection with his
positionorworkexceptwhenhismonetaryliability,contractualorotherwise,isinfavoroftheGSIS.
(Emphasisours.)


Theforegoingexemptingproviso,couchedasitwereinanencompassingmanner,brooksno
otherconstructionbutthatGSISisexemptfromallformsoftaxes.Whilenotdeterminativeofthis
case,itistobenotedthatprominentlyaddedinGSISpresentcharterisaparagraphprecludingany
impliedrepealofthetaxexemptclausesoastoprotectthesolvencyofGSISfunds.Moreover, an
expressrepealbyasubsequentlawwouldnotsufficetoaffectthefullexemptionbenefitsgranted
theGSIS,unlessthefollowingconditionalitiesaremet:(1)Therepealingclausemust expressly,
specifically, and categorically revoke or repeal Sec. 39 and (2) a provision is enacted to
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substituteorreplacetheexemptionreferredtohereinasanessentialfactortomaintainorprotect
thesolvencyofthefund.Theserestrictionsforafutureexpressrepeal,notwithstanding,donotmake
the proviso an irrepealable law, for such restrictions do not impinge or limit the carte blanche
legislativeauthorityofthelegislaturetosoamendit.Therestrictionsmerelyenhanceotherprovisos
inthelawensuringthesolvencyoftheGSISfund.

Giventheforegoingperspectives,thefollowingmaybeassumed:(1)PursuanttoSec.33of
PD1146,GSISenjoyedtaxexemptionfromrealestatetaxes,amongothertaxburdens,untilJanuary
1, 1992 when the LGC took effect and withdrew exemptions from payment of real estate taxes
privilegesgrantedunderPD1146(2)RA8291restoredin1997thetaxexemptstatusofGSISby
[19]
reenactingunderitsSec.39whatwasonceSec.33ofP.D.1146 and(3)Ifanyrealestatetaxis
duetotheCityofManila,itis,followingCityofDavao,onlyfortheinterimperiod,orfrom1992to
1996,tobeprecise.

RealpropertytaxesassessedandduefromGSISconsideredpaid


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 allembracing condoning proviso in the very
same Sec. 39 which, for all intents and purposes, considered as paid any assessment against the
GSISasoftheapprovalofthisAct.Ifonlytostressthepoint,weherebyreproducethepertinent
portionofsaidSec.39:

SEC.39.ExemptionfromTax,LegalProcessandLien.xxxTaxesimposedontheGSIStend
toimpairtheactuarialsolvencyofitsfundsandincreasethecontributionratenecessarytosustainthe
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,chargesordutiesofallkinds.Theseexemptionsshallcontinueunlessexpressly
andspecificallyrevokedandanyassessmentagainsttheGSISasoftheapprovalofthisActare
hereby considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions or
jurisprudencecontrarytoorinderogationofthisprovisionareherebydeemedrepealed,superseded
andrenderedineffectiveandwithoutlegalforceandeffect.(Emphasisadded.)

GSISaninstrumentalityoftheNationalGovernment


Apartfromtheforegoingconsideration,theCourtsfairlyrecentrulinginManilaInternational
[20]
AirportAuthorityv.CourtofAppeals, acaselikewiseinvolvingrealestatetaxassessmentsbya

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MetroManilacityontherealpropertiesadministeredbyMIAA,arguesforthenontaxliabilityof
GSISforrealestatetaxes.There,theCourtheldthatMIAAdoesnotqualifyasaGOCC,nothaving
beenorganizedeitherasastockcorporation,itscapitalnotbeingdividedintoshares,orasanon
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,whichmakesMIAAameretrusteeofsuchassets.NolessthantheAdministrativeCode
of1987recognizesascenariowhereapieceoflandownedbytheRepublicistitledinthenameofa
department,agency,orinstrumentality.ThefollowingprovisionofthesaidCodesuggestsasmuch:

Sec. 48. Official Authorized to Convey Real Property.Whenever real property of the
Governmentisauthorizedbylawtobeconveyed,thedeedofconveyanceshallbeexecutedinbehalf
ofthegovernmentbythefollowing:xxxx

(2)ForpropertybelongingtotheRepublicofthePhilippines,buttitledinthenameofxxx
[21]
anycorporateagencyorinstrumentality,bytheexecutiveheadoftheagencyorinstrumentality.

WhileperhapsnotofgoverningswayinallfoursinasmuchaswhatwereinvolvedinManila
International AirportAuthority, e.g., airfields and runways, are properties of the public dominion
and,hence,outsidethecommerceofman,therationaleunderpinningthedispositioninthatcaseis
squarely applicable to GSIS, both MIAA and GSIS being similarly situated. First, while created
under CA 186 as a nonstock corporation, a status that has remained unchanged even when it
operatedunderPD1146andRA8291,GSISisnot,inthecontextoftheaforequotedSec.193of
the LGC, a GOCC following the teaching of Manila International Airport Authority, for, like
MIAA,GSIScapitalisnotdividedintounitshares.Also,GSIShasnomemberstospeakof.Andby
members,thereferenceistothosewho,underSec.87oftheCorporationCode,makeupthenon
stock corporation, and not to the compulsory members of the system who are government
employees.ItsmanagementisentrustedtoaBoardofTrusteeswhosemembersareappointedbythe
President.

Second, the subject properties under GSISs 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
Governmentoracquiredfortheenhancementofthesystem.Thisparticularpropertyarrangementis
clearlyshownbythefactthatthedisposalorconveyanceofsaidsubjectpropertiesareeitherdone
by or through the authority of the President of the Philippines. Specifically, in the case of the
ConcepcionArrocerosproperty,itwastransferred,conveyed,andcededtothisCourtonApril27,
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2005 through a presidential proclamation, Proclamation No. 835. Pertinently, the text of the
proclamationannouncesthattheConcepcionArrocerospropertywasearliercededtotheGSISon
October13,1954pursuanttoProclamationNo.78forofficepurposesandhadsincebeentitledto
GSIS which constructed an office building thereon. Thus, the transfer on April 27, 2005 of the
ConcepcionArrocerospropertytothisCourtbythePresidentthroughProclamationNo.835.This
illustrates the nature of the government ownership of the subject GSIS properties, as indubitably
showninthelastclauseofPresidentialProclamationNo.835:

WHEREAS, by virtue of the Public Land Act (Commonwealth Act No. 141, as amended),
PresidentialDecreeNo.1455,andtheAdministrativeCodeof1987,thePresidentisauthorizedto
transferanygovernmentpropertythatisnolongerneededbytheagencytowhichitbelongsto
otherbranchesoragenciesofthegovernment.(Emphasisours.)


Third,GSISmanagesthefundsforthelifeinsurance,retirement,survivorship,anddisability
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
[22]
beneficiaries)whenandastheybecomedue.ThisguaranteewasfirstformalizedunderSec.24
[23] [24]
ofCA186,thenSec.8 ofPD1146,andfinallyinSec.8 ofRA8291.

SecondCoreIssue:BeneficialUseDoctrineApplicable

Theforegoingnotwithstanding,theleasedKatigbakpropertyshallbetaxablepursuanttothe
beneficialuseprincipleunderSec.234(a)oftheLGC.

It is true that said Sec. 234(a), quoted below, exempts from real estate taxes real property
ownedbytheRepublic,unlessthebeneficialuseofthepropertyis,forconsideration,transferredto
ataxableperson.
SEC.234.ExemptionsfromRealPropertyTax.Thefollowingareexemptedfrompayment
oftherealpropertytax:

(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,toataxableperson.

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This exemption, however, must be read in relation with Sec. 133(o) of the LGC, which
prohibitsLGUsfromimposingtaxesorfeesofanykindonthenationalgovernment,itsagencies,
andinstrumentalities:

SEC.133.CommonLimitationsontheTaxingPowersofLocalGovernmentUnits. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
andbarangaysshallnotextendtothelevyofthefollowing:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities,andlocalgovernmentunits.(Emphasissupplied.)


Thus read together, the provisions allow the Republic to grant the beneficial use of its
propertytoanagencyorinstrumentalityofthenationalgovernment.Suchgrantdoesnotnecessarily
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
governmentinstrumentality,isnotataxablejuridicalpersonunderSec.133(o)oftheLGC.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
54,826,599.37covering1992to2002overthesubjectKatigbakpropertyisvalidinsofarassaidtax
delinquencyisconcernedasassessedoversaidproperty.





Taxableentityhavingbeneficialuseofleased
propertyliableforrealpropertytaxesthereon


ThenextqueryastowhichbetweenGSIS,astheowneroftheKatigbakproperty,orMHC,as
thelesseethereof,isliabletopaytheaccruedrealestatetax,neednotdetainuslong.MHCoughtto
pay.

AswedeclaredinTestateEstateofConcordiaT.Lim,theunpaidtaxattachestotheproperty
andischargeableagainstthetaxablepersonwhohadactualorbeneficialuseandpossessionofit
regardless of whether or not he is the owner. Of the same tenor is the Courts holding in the

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[25] [26]
subsequentManilaElectricCompanyv.Barlis andlaterinRepublicv.CityofKidapawan.
Actualusereferstothepurposeforwhichthepropertyisprincipallyorpredominantlyutilizedby
[27]
thepersoninpossessionthereof.

Being in possession and having actual use of the Katigbak property since November 1991,
MHCisliablefortherealtytaxesassessedovertheKatigbakpropertyfrom1992to2002.

Theforegoingisnotall.Asitwere,MHChasobligateditselfundertheGSISMHCContract
ofLeasetoshouldersuchassessment.Stipulationl8ofthecontractpertinentlyreads:

18.Bylaw,theLessor,[GSIS],isexemptfromtaxes,assessmentsandlevies.Shouldtherebe
anychangeinthelawortheinterpretationthereoforanyothercircumstanceswhichwouldsubjectthe
LeasedPropertytoanykindoftax,assessmentorlevywhichwouldconstituteachargeagainstthe
LessororcreatealienagainsttheLeasedProperty,theLesseeagreesandobligatesitselftoshoulder
[28]
andpaysuchtax,assessmentorlevyasitbecomesdue. (Emphasisours.)


Asamatteroflawandcontract,therefore,MHCstandsliabletopaytherealtytaxesdueon
theKatigbakproperty.Considering,however,thatMHChasnotbeenimpleadedintheinstantcase,
theremedyoftheCityofManilaistoservetherealtytaxassessmentcoveringthesubjectKatigbak
propertytoMHCandtopursueotheravailableremediesincaseofnonpayment,forsaidproperty
cannotbelevieduponasshallbeexplainedbelow.

ThirdCoreIssue:GSISPropertiesExemptfromLevy

In light of the foregoing disquisition, the issue of the propriety of the threatened levy of
subject properties by the City of Manila to answer for the demanded realty tax deficiency is now
mootandacademic.Avalidtaxlevypresupposesacorrespondingtaxliability.Nonetheless,itwill
notberemisstonotethatitiswithoutdoubtthatthesubjectGSISpropertiesareexemptfromany
attachment, garnishment, execution, levy, or other legal processes. This is the clear import of the
thirdparagraphofSec.39,RA8291,whichwequoteanewforclarity:

SEC.39.ExemptionfromTax,LegalProcessandLien.xxx.
xxxx
Thefundsand/orthepropertiesreferredtohereinaswellasthebenefits,sumsormonies
corresponding to the benefits under this Act shall be exempt from attachment, garnishment,
execution,levyorotherprocessesissuedbythecourts,quasijudicialagenciesoradministrative
bodiesincludingCommissiononAudit(COA)disallowancesandfromallfinancialobligationsofthe
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members,includinghispecuniaryaccountabilityarisingfromorcausedoroccasionedbyhisexercise
or performance of his official functions or duties, or incurred relative to or in connection with his
positionorworkexceptwhenhismonetaryliability,contractualorotherwise,isinfavoroftheGSIS.
(Emphasisours.)


The Court would not be indulging in pure speculative exercise to say that the underlying
legislativeintentbehindtheaboveexemptingprovisocannotbeotherthantoisolateGSISfundsand
properties from legal processes that will either impair the solvency of its fund or hamper its
operationthatwouldultimatelyrequireanincreaseinthecontributionratenecessarytosustainthe
benefitsofthesystem.ThroughoutGSISlifeunderthreedifferentcharters,theneedtoensurethe
solvency of GSIS fund has always been a legislative concern, a concern expressed in the tax
exemptingprovisions.

Thus,evengrantingarguendo that GSIS liability for realty taxes attached from 1992, when
RA7160effectivelylifteditstaxexemptionunderPD1146,to1996,whenRA8291restoredthe
taxincentive,thelevyonthesubjectpropertiestoanswerfortheassessedrealtytaxdelinquencies
cannotstillbesustained.Thesimplereason:Thegoverninglaw,RA8291,inforceatthetimeofthe
levy prohibits it. And in the final analysis, the proscription against the levy extends to the leased
Katigbakproperty,thebeneficialusedoctrine,notwithstanding.

Summary

Insum,theCourtfindsthatGSISenjoysunderitscharterfulltaxexemption.Moreover,asan
instrumentalityofthenationalgovernment,itisitselfnotliabletopayrealestatetaxesassessedby
the City of Manila against its Katigbak and ConcepcionArroceros properties. Following the
beneficialuserule,however,accruedrealpropertytaxesareduefromtheKatigbakproperty,leased
asitistoataxableentity.Butthecorrespondingliabilityforthepaymentthereofdevolvesonthe
taxable beneficial user. The Katigbak property cannot in any event be subject of a public auction
sale,notwithstandingitsrealtytaxdelinquency.ThismeansthattheCityofManilahastosatisfyits
taxclaimbyservingtheaccruedrealtytaxassessmentonMHC,asthetaxablebeneficialuserofthe
Katigbakpropertyand,incaseofnonpayment,throughmeansotherthanthesaleatpublicauction
oftheleasedproperty.

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WHEREFORE,theinstantpetitionisherebyGRANTED.TheNovember15,2007Decision
and January 7, 2009 Order of the Regional Trial Court, Branch 49, Manila are REVERSED and
SET ASIDE. Accordingly, the real property tax assessments issued by the City of Manila to the
GovernmentServiceInsuranceSystemonthesubjectpropertiesaredeclaredVOID,exceptthatthe
realpropertytaxassessmentpertainingtotheleasedKatigbakpropertyshallbevalidifservedon
the Manila Hotel Corporation, as lessee which has actual and beneficial use thereof. The City of
Manilaispermanentlyrestrainedfromlevyingonorsellingatpublicauctionthesubjectproperties
tosatisfythepaymentoftherealpropertytaxdelinquency.

Nopronouncementastocosts.

SOORDERED.



PRESBITEROJ.VELASCO,JR.
AssociateJustice



WECONCUR:



RENATOC.CORONA
AssociateJustice
Chairperson




ANTONIOEDUARDOB.NACHURADIOSDADOM.PERALTA
AssociateJusticeAssociateJustice




MARIANOC.DELCASTILLO
AssociateJustice



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ATTESTATION

IattestthattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecase
wasassignedtothewriteroftheopinionoftheCourtsDivision.



RENATOC.CORONA
AssociateJustice
Chairperson



CERTIFICATION


PursuanttoSection13,ArticleVIIIoftheConstitution,andtheDivisionChairpersonsAttestation,I
certifythattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecase
wasassignedtothewriteroftheopinionoftheCourtsDivision.




REYNATOS.PUNO
ChiefJustice

*AdditionalmemberperSpecialOrderNo.805datedDecember4,2009.
[1]
Rollo,pp.2938.PennedbyJudgeConcepcionS.AlarconVergara.
[2]
Id.at39.
[3]
Id.at5152,entitledAmendingProclamationNo.78datedOctober13,1954byTransferringthePropertyHousingtheFormer
Officesofthe[GSIS]totheSupremeCourtofthePhilippines,ReservingtheSamefortheCityofManilaHallofJustice.
[4]
Id.at4041.
[5]
Id.at53,5455.
[6]
Id.at5662.
[7]
Id.at6376,datedOctober7,2002.
[8]
Id.at7790.
[9]
Id.at38.
[10]
Id.at11.
[11]
Entitled An Act to Create and Establish a Government Service Insurance System, to Provide for its Administration, and to
AppropriatetheNecessaryFundsTherefor.
[12]
Entitled Amending, Expanding, Increasing and Integrating the Social Security and Insurance Benefits of Government
EmployeesandFacilitatingthePaymentThereofUnderCommonwealthActNo.186,asAmended,andforOtherPurposes,approvedon
May31,1977.
[13]
Section34.ImplementingBody.TheGovernmentServiceInsuranceSystemascreatedandestablishedunderCommonwealth
ActNo.186shallimplementtheprovisionsofthisAct.
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[14]
Sec.133(o)oftheLGCprovidesthatthetaxingpowerofLGUsshallnotextendtothelevyoftaxes,feesorchargesofany
kindontheNationalGovernment,itsagenciesandinstrumentalitiesandLGUs.
[15]
G.R.No.120082,September11,1996,261SCRA667.
[16]
G.R.No.127383,18August2005,467SCRA280.
[17]
Id.at299.
[18]
AfteritspublicationintheJune9,1997issueofthePhilippineStar.
[19]
CityofDavao,supranote16.
[20]
G.R.No.155650,July20,2006,495SCRA591.
[21]
Chapter12,BookI.
[22]
Section24.Accountstobemaintained.TheSystemshallkeepseparateanddistinctfromoneanotherthefollowingfunds:
(a)xxxx
The Government of the Republic of the Philippines hereby guarantees the fulfillment of the obligations of the [GSIS] to the
membersthereofwhenandastheyshallbecomedue.
[23]
Section8.GovernmentGuarantee.TheGovernmentoftheRepublicofthePhilippinesherebyguaranteesthefulfillmentofthe
obligationsoftheSystemtoitsmembersasandwhentheyfalldue.
[24]
SEC.8.GovernmentGuarantee.ThegovernmentoftheRepublicofthePhilippinesherebyguaranteesthefulfillmentofthe
obligationsoftheGSIStoitsmembersasandwhentheyfalldue.
[25]
G.R.No.114231,May18,2001,357SCRA832andJune29,2004,433SCRA11.
[26]
G.R.No.166651,December9,2005,477SCRA324.
[27]
Idat333334citingLOCALGOVERNMENTCODE,Sec.199(b).
[28]
Rollo,p.48.

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