GR L 35726; (July, 1982) (Digest)
G.R. No. L-35726 July 21, 1982
SOCIAL SECURITY SYSTEM, petitioner, vs. CITY OF BACOLOD and MIGUEL REYNALDO as City Treasurer of Bacolod City, respondents.
FACTS
The Social Security System (SSS), a government agency created under Republic Act No. 1161, owns a five-storey regional office building on four parcels of land in Bacolod City. For its failure to pay real estate taxes for the years 1968 to 1970, totaling P104,956.06 with penalties, the City of Bacolod levied upon and declared the properties forfeited in its favor in April 1970. The SSS protested, claiming exemption as a government-owned corporation, and filed an action in the Court of First Instance of Negros Occidental to nullify the forfeiture.
The lower court dismissed the complaint. It ruled that the SSS, performing proprietary functions, did not fall under the tax exemption in Section 29 of the Charter of Bacolod City (Commonwealth Act No. 326). The court relied on the “constituent-ministrant” function distinction from NACOCO vs. Bacani, concluding that only agencies exercising governmental or sovereign functions were exempt. The SSS appealed to the Supreme Court.
ISSUE
Whether the real properties owned by the Social Security System are exempt from real estate taxes under Section 29 of the Charter of Bacolod City.
RULING
Yes. The Supreme Court set aside the lower court’s decision and declared the SSS properties exempt. The legal logic centers on the plain text of the applicable law. Section 29 of the Bacolod City Charter exempts from taxation “lands and buildings owned by the Commonwealth of the Philippines” without any qualification as to the governmental or proprietary nature of the owner’s functions. This unambiguous language mandates a broad application, exempting all government-owned property irrespective of its use.
The Court distinguished the issue from NACOCO vs. Bacani, which dealt with exemption from legal fees under a different statute (Republic Act No. 104). For real property tax exemption, the governing provision is the city charter itself, which contains no functional distinction. This interpretation is bolstered by Section 3(a) of the Assessment Law (Commonwealth Act No. 470), which similarly exempts properties owned by the Republic without distinction, a point affirmed in Board of Assessment Appeals vs. Court of Tax Appeals. The Court reiterated the axiom that for public property, exemption is the rule and taxation the exception. Furthermore, Presidential Decree No. 24, which amended the Social Security Act, expressly confirmed the SSS’s exemption from all taxes. Therefore, the forfeiture was invalid.