Philippine Heart Center v. Local Government of Quezon City
REITERATIONFacts
The Antecedents: Established in 1975 under Presidential Decree 673, the Philippine Heart Center (PHC) is a specialty hospital mandated to provide comprehensive cardiovascular care, particularly to the poor. The national government provided initial funding and assets, and the decree granted the PHC authority to acquire property, enter contracts, and dispose of its assets. Crucially, it was exempted from all taxes and charges imposed by government entities for ten years, an exemption later extended indefinitely. The PHC owns eleven parcels of land and buildings in Quezon City. In 2004, the Quezon City Government issued notices of delinquency for unpaid real property taxes on these properties, leading to a levy. The PHC attempted to resolve this through condonation requests and a Memorandum of Agreement (MOA) with Quezon City, wherein it agreed to provide free medical services in exchange for tax settlement. However, the PHC later suspended these agreements, citing a Supreme Court ruling that government entities are exempt from local taxes and an advisory from the Office of the Government Corporate Counsel. Procedural History: The Quezon City Government, asserting that the PHC was liable for real property taxes due to leasing portions of its properties to private entities, issued final notices of delinquency in 2011. This was followed by a Warrant of Levy and a public auction where the properties were sold to the Quezon City Government. In response, the PHC filed a petition for certiorari with the Court of Appeals (CA), arguing grave abuse of discretion by the Quezon City officials in assessing, levying, and selling its properties. The CA initially dismissed the petition for failure to exhaust administrative remedies. However, upon reconsideration, the CA reinstated the petition, finding that administrative remedies were no longer adequate given the auction sale of the properties and the urgent need for judicial intervention. The CA also ruled that the deposit requirement under Section 267 of the Local Government Code was not applicable. Subsequently, the CA, in a decision dated March 15, 2016, dismissed the petition again, holding that certiorari was the improper remedy as the respondents were not acting in a judicial or quasi-judicial capacity. This dismissal was affirmed on reconsideration. The Petition: The Philippine Heart Center (PHC) seeks to nullify the Court of Appeals' decision and resolution, arguing that certiorari was the proper remedy to challenge the Quezon City Government's actions, citing precedent where similar remedies were allowed. The PHC also contends that, as a government instrumentality, it is exempt from real property taxes under Presidential Decree 673, Letter of Instruction 1455, the Constitution, and relevant provisions of the Local Government Code, further supported by numerous Supreme Court decisions recognizing the tax exemption of government instrumentalities. The PHC asserts that its properties are devoted to public use and welfare and are therefore exempt from taxation and levy. The respondents, however, argue that the PHC failed to comply with verification and forum shopping rules, did not exhaust administrative remedies, and is not exempt from taxes because it leased portions of its properties to taxable private entities, citing Section 206 of the Local Government Code for proof of exemption. The PHC counters that the Officer-in-Charge Executive Director was authorized to sign the petition and that the issue of administrative remedies had already been settled by the CA. The Supreme Court, in its review, addresses the compliance with verification rules, the propriety of certiorari, and the substantive issue of tax exemption.
Issue(s)
Whether the PHC complied with the rules on verification and certification against forum shopping. Whether a petition for certiorari is the proper remedy to challenge respondents' assessment, levy, and sale of PHC properties for unpaid real property taxes. Whether the PHC is exempt from paying real property taxes on its eleven (11) properties in Quezon City.
Ruling
The petition is GRANTED. The Court of Appeals' Decision dated March 15, 2016 and Resolution dated June 23, 2016 in CA-G.R. SP No. 121019 are REVERSED and SET ASIDE. The Court DECLARES: (1) The Philippine Heart Center and its properties utilized in relation to the establishment, operation, and maintenance of a specialty hospital are EXEMPT from the real property taxes of the Quezon City Government; (2) All real property tax assessments, final notices of real property tax delinquencies, and the warrant of levy issued by Quezon City on PHC and its properties are VOID; and (3) The July 7, 2011 sale at public auction of PHC properties and the purchase of these properties by Quezon City are VOID.
Ratio Decidendi
On Whether the PHC complied with the rules on verification and certification against forum shopping: The Court found substantial compliance with Rule 7, Sections 4 and 5 of the Rules of Court. It recognized that while verifications and certifications signed without an express board resolution showing authority are defective in form, such defects do not necessarily mandate dismissal. The Court applied precedents including Swedish Match Philippines, Inc. v. The Treasurer of City of Manila and Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue to justify liberal acceptance of corporate officers' verifications where the signatory is in a position to verify allegations. The Court specifically accepted Dr. Manzo's verification given his designation as Officer-in-Charge Executive Director by DOH Order No. 2016-2359-A and concluded that he was sufficiently positioned to verify the petition's allegations. Liberal application of the rules was warranted to serve substantial justice given the public interest and the nature of the case. On Whether certiorari is the proper remedy: The Court held that certiorari is a proper remedy to correct grave abuse of discretion amounting to lack or excess of jurisdiction even when the challenged acts are not judicial or quasi-judicial in nature. It relied on Article VIII, Section 1 of the 1987 Constitution and prior authorities (e.g., Ifurung v. Hon. Carpio-Morales) to explain the Supreme Court's expanded power of judicial review exercised via special civil actions under Rule 65. The Court reasoned that where local officials allegedly acted with grave abuse of discretion in assessing, levying, and selling properties of a national instrumentality, certiorari may be invoked to nullify such acts if the allegations, if proved, would demonstrate lack or excess of jurisdiction. The Court noted that the PHC specifically alleged grave abuse of discretion as respondents acted despite asserted exemptions under PD 673, LOI 1455, the Constitution, RA 7160 and controlling jurisprudence, making certiorari an appropriate remedy to obtain prompt judicial relief. Given the potential irreparable harm from transfer of properties essential to public health services, judicial intervention by certiorari was justified. On Whether the PHC is exempt from real property taxes: The Court applied controlling jurisprudence recognizing that national government instrumentalities vested with corporate powers are exempt from local taxation absent clear legislative intent to the contrary, citing Manila International Airport Authority (MIAA) and related authorities. It examined statutory provisions including Section 133(o) and Section 234(a) of RA 7160, the Administrative Code (EO 292) definition of "Instrumentality," EO 596, and the GOCC Governance Act (RA 10149) to determine the classification of PHC. The Court concluded PHC satisfies the twin elements of performing governmental functions and enjoying operational autonomy and is therefore a government instrumentality vested with corporate powers exempt from local real property taxes. The Court further held that PHC properties are properties of public dominion devoted to public use and thus not subject to levy or sale, relying on Article 420 of the Civil Code and the MIAA line of cases. However, following settled precedent, the Court explained that portions of government-owned properties that have been granted for the beneficial use of taxable private persons may be taxed, and that the taxing authority bears the burden to plead and prove which portions were leased, to whom, and that those lessees were validly assessed and served. Because respondents failed to prove that specific properties or portions thereof were leased and validly assessed on lessees, the assessments, levy, and sale were invalidated. The Court emphasized that local governments cannot effect collection by levy on properties of public dominion and must pursue personal actions against taxable beneficiaries instead.
Main Doctrine
Government instrumentalities vested with corporate powers are exempt from local real property taxes; properties of public dominion devoted to public use are not subject to levy or sale, except those portions that have been granted for the beneficial use of taxable private persons.