City Assessor of Cebu City v. Association of Benevola de Cebu
REITERATIONFacts
The Antecedents: Respondent Association of Benevola de Cebu, Inc. (owner of Chong Hua Hospital - CHH) constructed the CHH Medical Arts Center (CHHMAC). The Certificate of Occupancy classified it as "Commercial [Clinic]." Petitioner City Assessor of Cebu City assessed CHHMAC as a "commercial" building with a 35% assessment rate. Respondent asserted that CHHMAC is part of CHH and should be subject to the 10% special assessment rate applicable to CHH and its other separate buildings (Dietary and Records Departments). Procedural History: Respondent filed a letter-petition with the Local Board of Assessment Appeals (LBAA), which reversed the City Assessor's ruling and imposed a 10% assessment level. The Central Board of Assessment Appeals (CBAA) affirmed the LBAA decision. The Court of Appeals (CA) also affirmed the CBAA decision, holding that CHHMAC is part and parcel of CHH and thus not commercial. The CA denied petitioner's motion for reconsideration. The Petition: Petitioner filed a Petition for Review on Certiorari with the Supreme Court, assailing the CA's decision and resolution. The core issue is whether CHHMAC is an essential part of CHH, thus entitled to the 10% special assessment rate, or a separate commercial establishment liable for the 35% assessment rate.
Issue(s)
Whether the Chong Hua Hospital Medical Arts Center (CHHMAC) is an essential part of Chong Hua Hospital (CHH). Whether CHHMAC is liable to pay the 35% assessment level for commercial buildings. Whether the Court of Appeals could interfere with the findings of the Central Board of Assessment Appeals, an agency with special technical knowledge.
Ruling
The petition is denied for lack of merit. The assailed Decision and Resolution of the Court of Appeals are affirmed.
Ratio Decidendi
On whether CHHMAC is an essential part of CHH: The Court held that CHHMAC is an integral part of CHH. It reasoned that the doctors and medical specialists holding clinics in CHHMAC are duly accredited by CHH and are the ones who can treat CHH's confined patients. This fulfills the legal requirement for a tertiary hospital to be fully departmentalized and equipped with service capabilities to support certified medical specialists, as mandated by Department of Health Administrative Order No. 68-A, Series of 1989. The fact that these physicians hold offices in a separate building does not negate the essence and nature of their services in the overall operation of the hospital. The Court further cited Herrera v. Quezon City Board of Assessment Appeals and Abra Valley College, Inc. v. Aquino, stating that exemptions for charitable or educational purposes extend to facilities incidental and reasonably necessary for the accomplishment of the institution's goals, which includes facilities for medical practitioners serving the hospital's patients. The Court emphasized that CHHMAC is not operated primarily for profit but as an integral part of CHH. On whether CHHMAC is liable to pay the 35% assessment level: The Court ruled that CHHMAC is not liable for the 35% commercial assessment level. It reasoned that CHHMAC is an integral part of CHH and thus should be under the same special assessment level of 10%. The Court clarified that the charging of rentals for the offices used by its accredited physicians does not equate to a commercial venture. These rentals are a practical necessity to recoup investment costs, cover lot rentals, and maintain the building and facilities. Any net income is used for respondent's other charitable projects, not for private gain. Furthermore, the Court applied Sections 215 and 216 of the Local Government Code (Republic Act No. 7160), which classify lands, buildings, and improvements actually, directly, and exclusively used for hospitals as "special" classes of real property, not commercial. On whether the Court of Appeals could interfere with the findings of the CBAA: While not explicitly addressed as a separate issue in the ratio, the Court's affirmation of the CA's decision, which in turn affirmed the CBAA's findings, implicitly supports the principle that courts generally do not interfere with the findings of administrative agencies with special technical knowledge and training, such as the CBAA, unless there is a grave abuse of discretion or a clear misapplication of the law. The CA itself noted this principle in its decision, stating that the findings and conclusions of such agencies are accorded not only respect but even finality.
Main Doctrine
A building constructed by a hospital to house its accredited physicians, which provides services essential and incidental to the hospital's operations and is not operated primarily for profit, is considered an integral part of the hospital and should be subject to the special assessment rate for hospitals, not the commercial rate.