Lung Center of the Philippines v. Quezon City
REITERATIONFacts
The Antecedents: The Lung Center of the Philippines (LCP), a non-stock and non-profit entity, is the registered owner of a parcel of land with a hospital building erected thereon. Portions of the ground floor are leased to private parties for canteen and store spaces, and to medical practitioners for their clinics. A significant portion of the land is vacant, while another part is leased for commercial purposes to a private enterprise. LCP accepts both paying and non-paying patients and receives government subsidies. On June 7, 1993, LCP's land and hospital building were assessed for real property taxes. LCP filed a claim for exemption, asserting it is a charitable institution under Section 28(3), Article VI of the 1987 Constitution, alleging that at least 60% of its beds are for charity patients and its main thrust is to serve them. Procedural History: The City Assessor denied LCP's claim for exemption. The Local Board of Assessment Appeals (QC-LBAA) dismissed LCP's petition, holding it liable for real property taxes. The Central Board of Assessment Appeals (CBAA) affirmed the QC-LBAA's decision, ruling that LCP was not a charitable institution and its properties were not actually, directly, and exclusively used for charitable purposes. The Court of Appeals (CA) also affirmed the CBAA's decision. The Petition: LCP filed a petition for review on certiorari, contending that the CA erred in declaring it not entitled to realty tax exemptions on the ground that its properties were not actually, directly, and exclusively devoted for charitable purposes, and that even if its charter (PD 1823) did not grant such exemption, it could still claim exemption under the 1987 Constitution.
Issue(s)
Whether the petitioner is a charitable institution within the context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act No. 7160. Whether the real properties of the petitioner are exempt from real property taxes.
Ruling
The petition is partially granted. The Court held that the petitioner is a charitable institution. However, portions of its real property that are leased to private entities are not exempt from real property taxes because they are not actually, directly, and exclusively used for charitable purposes. The Court directed the respondent Quezon City Assessor to determine the precise portions of the land leased to private persons and to compute the real property taxes due thereon.
Ratio Decidendi
On whether the petitioner is a charitable institution: The Court held that the petitioner is a charitable institution within the context of the 1973 and 1987 Constitutions. The Court considered several elements, including the statute creating the enterprise, its corporate purposes, its constitution and by-laws, methods of administration, the nature of the actual work performed, the character of the services rendered, the indefiniteness of the beneficiaries, and the use and occupation of the properties. Presidential Decree No. 1823 established the petitioner as a non-profit and non-stock corporation organized for the welfare and benefit of the Filipino people, principally to combat lung and pulmonary diseases. Its Articles of Incorporation further detailed its purposes, which included providing specialized health and medical services, promoting scientific research, disseminating information on lung health, training medical personnel, and extending medical services to the public in general, including the poor and needy, without discrimination. The Court reiterated the principle that a charitable institution does not lose its character or tax exemption simply because it derives income from paying patients or receives government subsidies, provided the income is devoted to its charitable objects and no private profit is made. The Court cited foreign jurisprudence supporting the view that receiving payments from some patients does not impair the charitable character of an institution if profits are devoted to its charitable purposes and no one is refused benefits due to inability to pay. On whether the real properties are exempt from real property taxes: The Court ruled that while the petitioner is a charitable institution, not all of its real properties are exempt from real property taxes. The exemption under Section 28(3), Article VI of the 1987 Constitution and Section 234(b) of Republic Act No. 7160 requires that lands, buildings, and improvements must be actually, directly, and exclusively used for charitable purposes. The Court emphasized that the words "actually" and "directly" were added to the constitutional provision, distinguishing it from the 1935 Constitution. The petitioner failed to prove that its entire real property was used for charitable purposes. Portions of the hospital leased to private individuals for clinics and a canteen, as well as a portion of the land leased to a private enterprise for commercial purposes, were not considered actually, directly, and exclusively used for charitable purposes. The Court noted that the petitioner collected substantial rental income from these leased portions. Therefore, only the portions of the land occupied by the hospital and used for its patients, whether paying or non-paying, are exempt from real property taxes.
Main Doctrine
A charitable institution is entitled to real property tax exemption for its properties only if such properties are actually, directly, and exclusively used for charitable purposes. Portions of the property leased to private entities for commercial purposes are not exempt.