Case Digest (G.R. No. 144104)
Facts:
The case arose from a Rule 45 petition by Lung Center of the Philippines (petitioner), a non-stock, non-profit trust created by P.D. No. 1823, owner of a 121,463 sqm lot in Quezon City with a hospital building, against Quezon City and Constantino P. Rosas, City Assessor. On June 7, 1993 the City Assessor assessed the land and building for real property tax (P4,554,860) and Tax Declarations were issued; the petitioner filed a Claim for Exemption on August 25, 1993, which the QC-LBAA, the Central Board of Assessment Appeals, and the Court of Appeals all denied, prompting this petition.
Issues:
- Is Lung Center of the Philippines a charitable institution within the meaning of P.D. No. 1823, the 1973 and 1987 Constitutions, and Sec. 234(b), R.A. No. 7160?
- Are the petitioner’s lands, buildings, and improvements exempt from real property tax under Section 28(3), Article VI, 1987 Constitution and Sec. 234(b), R.A. No. 7160?
Ruling:
The petition was partially granted. The Court held that Lung Center of the Philippines is a charitable institution as created and authorized by P.D. No. 1823 and its articles of incorporation.
However, the Court held that only those portions of the land and hospital actually, directly and exclusively used for charitable purposes are tax-exempt; portions leased to private entities or otherwise used for commercial purposes are subject to real property tax, and the Quezon City Assessor was directed to determine and compute the taxable portions after due hearing.
Ratio:
The Court found the Center’s statutory creation, corporate purposes, by‑laws, and actual operations established its charitable character, and revenue from paying patients or government subsidies did not negate that character so long as receipts were devoted to the charitable object and no private inurement occurred. Conversely, tax exemptions are construed strictissimi juris; P.D. No. 1823 did not expressly exempt real property from taxation, and Section 28(3), Article VI, 1987 Constitution together with Sec. 234(b), R.A. No. 7160 require clear proof that lands, buildings and improvements are actually, directly and exclusively used for charitable purposes, so commercial or leased portions remain taxable.
Doctrine:
- A nonprofit institution’s receipt of fees from paying beneficiaries or government subsidies does not defeat its charitable character if income is applied to the charitable object and no private benefit accrues.
- Tax exemptions are exceptions to the rule of taxation and are to be construed strictissimi juris against the claimant.
- Under Section 28(3), Article VI, 1987 Constitution and Sec. 234(b), R.A. No. 7160, only lands, buildings, and improvements *actually, directly and exclusively* used for charitable purposes are exempt from real property tax.
- Absence of an express real property tax exemption in an organic charter (here, P.D. No. 1823) means such exemption is not granted; expressio unius est exclusio alterius applies.
- Portions of property used for commercial purposes or leased to private parties are not exclusively used for charitable purposes and are therefore taxable.