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City of Davao vs.

RTC

G.R. No. 127383, August 18, 2005

o tax exemption rules governing GSIS and exceptions


o the plenary powers of Congress cannot be limited by passage of un-repealable laws

FACTS:

GSIS Davao City branch office received a Notice of Public Auction, scheduling public
bidding of its properties for non-payment of realty taxes from 1992-1994, amounting to
the sum total of Php 295, 721.61. The auction was, however, subsequently reset by
virtue of a deadline extension given by Davao City.

On July 28, 1994, GSIS received Warrants of Levy and Notices of Levy on three parcels
of land it owned and another Notice of Public Auction. In September of that same year,
GSIS filed a petition for Certiorari, Prohibition, Mandamus and/or Declaratory Relief with
the Davao City RTC.

During pre-trial, the only issue raised was whether sec. 234 and 534 of the Local
Government Code, which have withdrawn real property tax from GOCCs, have also
withdrawn from the GSIS its right to be exempted from payment of realty tax.

RTC rendered decision in favor of GSIS. Hence this petition.

ISSUE/S:

Whether the GSIS tax exemptions can be deemed as withdrawn by the LGC
W/N sec. 33 of P.D. 1146 has been repealed by the LGC

HELD:

Reading together sec. 133, 232, and 234 of the LGC, as a general rule: the taxing
powers of LGUs cannot extend to the levy of “taxes, fees, and charges of any kind on
the National Government, its agencies and instrumentalities, and LGUs.”

However, under sec. 234, exemptions from payment of real property taxes granted to
natural or juridical persons, including GOCCs, except as provided in said section, are
withdrawn upon effectivity of LGC. GSIS being a GOCC, then it necessarily follows that
its exemption has been withdrawn.

Regarding P.D. 1146 which laid down requisites for repeal on the laws granting
exemption, Supreme Court found a fundamental flaw in Sec. 33, particularly the
amendatory second paragraph.

Said paragraph effectively imposes restrictions on the competency of the Congress to


enact future legislation on the taxability of GSIS. This places an undue restraint on the
plenary power of the legislature to amend or repeal laws.

Only the Constitution may operate to preclude or place restrictions on the amendment
or repeal laws. These conditions imposed under P.D. 1146, if honored, have the precise
effect of limiting the powers of Congress.

Supreme Court held that they cannot render effective the amendatory second
paragraph of sec. 33, for by doing so, they would be giving sanction to a disingenuous
means employed through legislative power to bind subsequent legislators to a
subsequent mode of repeal. Thus, the two conditions under sec. 33 cannot bear
relevance whether the LGC removed the tax-exempt status of GSIS.

Furthermore, sec. 5 on the rules of interpretation of LGC states that “any tax exemption,
incentive or relief granted by any LGU pursuant to the provision of this Code shall be
construed strictly against the person claiming it.”

The GSIS tax-exempt stats, in sum, was withdrawn in 1992 by the LGC but restored by
the GSIS Act of 1997, sec. 39. The subject real property taxes for the years 1992-1994
were assessed against GSIS while the LGC provisions prevailed and thus may be
collected by the City of Davao.

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