G.R. No. L-29772 September 18, 1980
CITY OF BAGUIO, plaintiff-appellee, vs. FERNANDO S. BUSUEGO, defendant-appellant.

FACTS

The City of Baguio filed a tax collection suit against Fernando S. Busuego for unpaid realty taxes from 1962 to 1966 on a property within a GSIS housing project. The parties submitted a stipulation of facts. On August 11, 1959, Busuego and the GSIS executed a “Contract to Sell” for the property. The agreed purchase price had not been fully paid, and legal title remained with GSIS under TCT No. T-3978, although possession had been transferred to Busuego. Commonwealth Act No. 186 exempts GSIS and its property from all taxes. The City consistently assessed the property in GSIS’s name. The unpaid taxes amounted to P1,656.00. Demands were made on Busuego, who refused payment. The contract stipulated that title remains with GSIS until full payment, but paragraph 2 of the contract expressly stated that the purchaser (Busuego) agreed “to pay and shoulder all taxes and assessments on the subject property.” Busuego paid P287.80 for 1963 taxes but later sought a refund upon discovering GSIS’s tax exemption.

ISSUE

Whether the installment purchaser, Fernando S. Busuego, is liable for the payment of realty taxes on the property despite the seller GSIS’s statutory tax exemption and retention of legal title.

RULING

Yes, Busuego is liable. The Court affirmed the lower courts’ decisions, applying the rule that tax exemptions are construed in strictissimi juris (strictly against the claimant). The legal logic proceeds from the contractual obligation, the transfer of beneficial use, and the principle that tax exemption is personal. First, the contractual stipulation in paragraph 2, where Busuego voluntarily agreed to pay all taxes, is valid and binding. By accepting this condition, he is estopped from denying liability. Second, ownership for tax purposes does not rely solely on naked title. The “use” of the property is a primary determinant of tax liability. Upon delivery of possession, all beneficial attributes of ownership—use, control, and enjoyment—passed to Busuego. The GSIS retained only a security title. Consequently, the tax exemption, being personal to GSIS, did not extend to the private beneficial user. The Court noted that the GSIS, by imposing the tax payment condition, interpreted that its immunity was not transmitted. This interpretation is consistent with policy, as holding otherwise would unjustly deprive the government of revenue from property used privately. The lower court’s potential error in classifying the contract as a perfected sale was deemed non-decisive; the correct ruling was based on the enforceability of the tax assumption clause and the transfer of beneficial use.