Case Summary (G.R. No. 144104)
Procedural History and Facts
• June 7, 1993: City Assessor assessed land and building for real property tax at ₱4,554,860; Tax Declarations Nos. C-021-01226 and C-021-01231 issued.
• August 25, 1993: LCP filed a Claim for Exemption based on Section 28(3), Article VI of the 1987 Constitution. Claim denied by the Assessor.
• Appeals to QC Local Board of Assessment Appeals and Central Board of Assessment Appeals – both dismissed LCP’s petition, holding it not “actually, directly and exclusively” devoted to charitable purposes.
• Court of Appeals (CA-G.R. SP No. 57014) affirmed the CBAA decision on July 17, 2000.
• LCP filed a Rule 45 petition for review on certiorari in the Supreme Court.
Issues
- Whether LCP qualifies as a “charitable institution” under PD 1823, Article VI, Section 28(3) of the 1987 Constitution (and its predecessor provisions), and Section 234(b) of Republic Act No. 7160 (Local Government Code).
- Whether LCP’s real properties are exempt from real property tax as lands, buildings, and improvements “actually, directly and exclusively used for charitable purposes.”
Applicable Law
• Presidential Decree No. 1823 (1981) – creates LCP; grants tax exemption for donations, contributions, equipment imports, income and gift taxes on contributions, and certain government-imposed fees, but does not grant real property tax exemption.
• 1987 Constitution, Article VI, Section 28(3) – exempts from taxation “charitable institutions … and all lands, buildings, and improvements actually, directly and exclusively used for … charitable … purposes.”
• Local Government Code (R.A. 7160), Section 234(b) – implements the constitutional exemption for real property tax, requiring actual, direct, and exclusive use for charitable purposes.
• Doctrine of strictissimi juris – tax exemptions are exceptions to the rule and must be clearly and unmistakably provided.
Court’s Analysis
Charitable Institution Status
• Charity defined as a gift or an entity benefiting an indefinite class of beneficiaries through relief, education, health, or other public-minded purposes.
• Factors: statutory creation, corporate purposes, bylaws, administration, nature of work, beneficiaries, and use of properties.
• LCP’s charter and Articles of Incorporation mandate non-discriminatory medical service for lung diseases, research, training, public education, and reliance on donations and subsidies.
• Accepting fees from paying patients and leasing premises does not defeat charitable character so long as proceeds are devoted solely to charitable objectives and no private benefit inures to organizers. Subsidies are akin to donations.
Tax Exemption of Real Property
• Under PD 1823, LCP enjoys specified tax privileges but none for real property; expressio unius est exclusio alterius excludes other exemptions.
• Constitutional and statutory exemptions apply only to property “actually, directly and exclusively” used for charitable purposes.
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Case Syllabus (G.R. No. 144104)
Facts and Background
- The Lung Center of the Philippines (LCP) is a non-stock, non-profit corporation created by Presidential Decree No. 1823 on January 16, 1981, administered by the Office of the President in coordination with the Ministries of Health and Human Settlements.
- LCP owns a 121,463 sqm parcel (Lot RP-3-B-3A-1-B-1, SWO-04-000495; TCT No. 261320) at Quezon Avenue corner Elliptical Road, Quezon City, on which it erected a specialized hospital for lung and pulmonary care.
- Portions of the ground floor are leased to private canteen operators and medical practitioners; nearly one-half of the lot’s left side remains idle; a segment at the corner is leased to “Elliptical Orchids and Garden Center.”
- LCP admits paying and non-paying (charity) patients, renders outpatient services, and receives annual government subsidies to support its operations.
- On June 7, 1993, Quezon City assessed both land and building for real property taxes totaling ₱4,554,860; ensuing tax declarations were issued for the land (No. C-021-01226) and the building (No. C-021-01231).
Procedural History
- August 25, 1993: LCP files a Claim for Exemption with the City Assessor, asserting charitable-institution status under the 1987 Constitution (Art. VI, § 28(3)).
- City Assessor denies the claim; LCP appeals to the QC Local Board of Assessment Appeals (QC-LBAA), which dismisses and upholds tax liability.
- LCP elevates the matter to the Central Board of Assessment Appeals (CBAA), which likewise affirms non-entitlement to exemption.
- Court of Appeals (CA-G.R. SP No. 57014) on July 17, 2000 affirms the CBAA decision.
- LCP files a Rule 45 certiorari petition before the Supreme Court, challenging (a) its exclusion from charitable status and (b) the taxability of its real property.
Issues
- Whether LCP qualifies as a “charitable institution” under:
• Presidential Decree No. 1823;
• the 1973 and 1987 Constitutions; and
• Section 234(b), Local Government Code (RA 7160). - Whether LCP’s land, building, and improvements are exempt from real property tax as “actually, directly, and exclusively used for charitable purposes.”
Petitioner’s Contentions
- LCP is a charitable institution despite admitting paying patients and leasing portions of its property, because:
• 60% of its 282 beds are reserved for charity patients; 100% of out-patients from 1995–1999 were indigent;
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