GOVERNMENT SERVICE INSURANCE SYSTEM

vs.
CITY TREASURER and CITY ASSESSOR of the CITY OF MANILA (2009)

Facts:
The City Treasurer of Manila addressed a letter to the GSIS President and General Manager Winston F. Garcia
informing him of the unpaid real property taxes due on the Katigbak property and Concepcion-Arroceros
property. The letter warned of the inclusion of the subject properties in the scheduled public auction of all
delinquent properties in Manila should the unpaid taxes remain unsettled before that date. The City Treasurer
of Manila issued separate Notices of Realty Tax Delinquency for the subject properties, with the usual warning
of seizure and/or sale. GSIS wrote back emphasizing the GSIS’ exemption from all kinds of taxes under (RA)
8291.

GSIS filed a petition for certiorari and prohibition with prayer for a restraining and injunctive relief before the
Manila RTC. GSIS prayed for the nullification of the assessments thus made. GSIS would later amend its
petition to include the fact that: (a) the Katigbak property, covered by TCT Nos. 117685 and 119465 in the
name of GSIS, has, since November 1991, been leased to and occupied by the Manila Hotel Corporation
(MHC), which has contractually bound itself to pay any realty taxes that may be imposed on the subject
property; and (b) the Concepcion-Arroceros property is partly occupied by GSIS and partly occupied by the
MeTC of Manila.

RTC dismissed GSIS’ petition. GSIS sought but was denied reconsideration. Thus, the instant petition for
review.

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.

Ruling:

1. Yes. 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.

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.

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. 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.
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; 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.

2. Yes.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) 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.

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, 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 and later in Republic v. City of Kidapawan. Actual use refers to the purpose for which the
property is principally or predominantly utilized by the person in possession thereof.

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. Considering, however, that MHC has
not been impleaded in the instant case, the 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 be levied upon as shall be explained below.

3. 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, garnishment, execution, levy,
or other legal processes.

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 Manila against its
Katigbak and Concepcion-Arroceros properties. Following the "beneficial use" rule, however, accrued 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. The Katigbak property cannot in any
event be subject of a public auction sale, notwithstanding its realty tax delinquency. This means that the City of
Manila has to satisfy its tax claim by serving the accrued realty tax assessment on MHC, as the taxable
beneficial user of the Katigbak property and, in case of nonpayment, through means other than the sale at
public auction of the leased property.