MANILA, Philippines - The Supreme Court (SC) has dismissed the petition filed by the Government Service Insurance System (GSIS) seeking to nullify the rulings of the Court in Appeals (CA) and the Regional Trial Court of Pasig City ordering it to pay at least P400 million for 78 lots it wrongly foreclosed between 1956 to 1957.

On the other hand, the Court declared in a separate ruling that the GSIS is a government instrumentality, thus, exempt from the taxing power of local government units (LGUs).

In a 33-page decision penned by Associate Justice Teresita Leonardo-De Castro, the Court’s First Division did not give weight to the claim of GSIS that its financial solvency would be greatly affected if the payment of the said properties would push through.

While it was aware of the problems facing the GSIS at this time, like the recurring computer glitch in a software system it bought from IBM Corp. and the influx of calamity-loan applications of members affected by devastating typhoons last year, the Court has no choice but to “uphold the rights” of private claimant Rosario Enriquez Santiago.

“Being government employees ourselves, we understand the need to preserve the actuarial solvency of the GSIS, especially at this time when, right after the series of calamities that have severely affected the country, GSIS needs to release funds for the various loan applications being made nationwide,” the Court said in affirming the CA decision dated April 27, 2007.

“The Court, in dismissing this petition, is aware of the predicament that petitioner finds itself in at this time, however, justice requires us to look at both sides and at the entirety of the case now before us. In doing so, we recognize that rights of private citizens had already arisen and we uphold such rights,” it added.

The CA, in its April 2007 ruling, modified the orders issued by the Pasig RTC which  granted the motion for execution filed by Rosario Enriquez de Santiago, seeking the implementation of its order for the GSIS to return to properties which she inherited from her late husband Eduardo Santiago.

If the 78 lots could no longer be reconveyed, the trial court directed the GSIS to pay Santiago the fair market value of the each of said lots with a total area of 33,319 square meters.

The trial court subsequently fixed the current fair market value of the subject lots located at San Antonio Village, Pasig City, at P35,000 per square meter or a total of P1.16 billion.

The CA, however, modified the ruling of the Pasig RTC by directing the GSIS to pay  P12,000 per square meter or a total of P399,828,000 for the said lots pending the conduct by the Pasig RTC of a hearing for the purpose of determining their actual fair market value.

The appellate court found merit in the claim of the GSIS that the valuation of the lots at P35,000 per square meter has no factual and legal basis.

It said that any difference between the P12, 000 per sq m valuation and the fair market value of the subject lots as of April 29, 2004, as may be finally determined by the lower court, can be recovered later.

Court records showed that the private claimant took over on the death of her husband, Eduardo Santiago, who had taken over as petitioner in the case that was originally filed by the successor-in-interest of the couple Jose Zulueta and Soledad Ramos before the Pasig RTC in 1990.

From September 1956 to 1957, the couple obtained several loans from GSIS amounting to P3.11 million secured by a real estate mortgage on several parcels of lands in Pasig City and covered by three mother titles.

Due to their failure to pay their obligations, GSIS foreclosed the mortgages  for P5.22 million.

Being the highest bidder, the GSIS was issued a certificate of sale by the sheriff.

On March 6, 1980, GSIS sold the foreclosed properties to Yorkstown Development Corp., which sale was disapproved by the Office of the President.

After GSIS had re-acquired the properties sold to Yorkstown Development Corp., it began disposing the foreclosed lots, including the excluded ones.

Meanwhile, in a separate decision penned by Associate Justice Presbitero Velasco Jr., the SC declared null and void the ruling of the RTC in Manila City which declared as valid the P103-million tax assessment issued by the Manila City government against GSIS properties located at Katigbak, St. Bonifacio Drive and at Concepcion corner Arroceros Streets.

The Court held that pursuant to Presidential Decree (PD) 1146 or the GSIS charter, the state pension fund enjoyed tax exemption from real-estate taxes until January 1, 1992, when the Local Government Code (LGC) took effect and withdrew exemptions from payment of real-estate-tax privileges granted under its charter.

However, Republic Act 8291, which amended PD 1146 by expanding and increasing the coverage and benefits of the GSIS, restored in 1997 the tax-exempt status of GSIS.

Like the Manila International Airport Authority, the SC held that GSIS is an instrumentality of the national government, hence, “outside the purview of local taxation” under Section 133 of the LGC which prohibits LGUs from taxing government instrumentalities.

“The subject properties under GSIS’s 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 government or acquired for the enhancement of the system,” the Court said.