Case Summary (G.R. No. 225409)
Petitioner
Philippine Heart Center, represented by its Officer-in-Charge Executive Director, Dr. Gerardo S. Manzo.
Respondents
Local Government of Quezon City, City Mayor, City Treasurer, and City Assessor of Quezon City.
Key Dates
– 1975: PHC established under PD 673.
– 1985: Tax exemption extended by Letter of Instruction 1455.
– 2004: Final Notices of Delinquency issued for unpaid real property taxes.
– July 7, 2011: Properties sold at public auction to LGU-QC.
– September 1, 2011: PHC filed petition for certiorari with the Court of Appeals (CA).
– March 15, 2016: CA dismissed petition as an improper remedy.
– June 23, 2016: CA denied PHC’s motion for reconsideration.
– February 28, 2022: Supreme Court decision.
Applicable Law
– 1987 Constitution, Article III, Section 28(3) (tax exemption for charitable institutions).
– Local Government Code (RA 7160), Sections 133(o), 206, 232, 234, 252, 256, 267.
– PD 673 and LOI 1455 (PHC’s creation and tax exemption).
– Rule 65, Rules of Court (certiorari).
Petition and Proceedings
PHC challenged LGU-QC’s assessment, levy, and sale of its properties before the CA via petition for certiorari, alleging tax exemption under PD 673, LOI 1455, the 1987 Constitution, and RA 7160. Respondents opposed on procedural grounds (non-exhaustion of remedies, lack of deposit, defective verification) and substantive grounds (PHC leased portions of its properties to private entities).
Establishment and Tax Exemptions
PD 673 created PHC as a government instrumentality with corporate powers, exempting it from all taxes for ten years. LOI 1455 extended this exemption indefinitely. PHC consulted the Office of the Government Corporate Counsel, which advised suspension of any tax payments pending Supreme Court rulings recognizing government instrumentalities’ tax immunity.
Dispute over Property Taxation
LGU-QC issued delinquency notices totaling ₱36.53 million in 2004. PHC negotiated Memoranda of Agreement to settle by providing free services but suspended performance after MIAA v. CA recognized tax exemption of national government entities. In 2011, LGU-QC levied on and auctioned PHC properties.
Court of Appeals Rulings
– September 25, 2012: CA dismissed petition for failure to exhaust administrative remedies under Section 252, RA 7160.
– March 18, 2013: CA reinstated petition, finding exhaustion remedies inadequate and noting PHC’s public service role.
– March 15, 2016: CA dismissed petition anew, holding certiorari unavailable against non-judicial acts (assessment, levy, sale).
– June 23, 2016: CA denied reconsideration.
Issues Before the Supreme Court
- Whether PHC complied with verification and certification against forum shopping.
- Whether certiorari was the proper remedy to challenge respondents’ acts.
- Whether PHC’s properties were exempt from real property tax.
Verification and Certification Requirements
Although PHC initially relied on a DOH order designating Dr. Manzo as Officer-in-Charge without a separate board resolution authorizing him to verify and certify against forum shopping, the Supreme Court found substantial compliance. Dr. Manzo’s position enabled him to attest to the petition’s allegations, and any formal defects did not prejudice respondents.
Proper Remedy: Certiorari
Under Article VIII, Section 1 of the 1987 Constitution and Rule 65, certiorari corrects grave abuse of discretion by any government instrumentality. The Supreme Court held that PHC properly invoked certiorari to challenge non-judicial acts (assessment, levy, sale) tainted by grave abuse of discretion.
Government Instrumentality with Corporate Powers
PHC is an instrumentality of the national government, not integrated within a department, vested with corporate powers (e.g., to acquire, encumber, convey property) under PD 673. Per MIAA and subsequent GOCC-Governance laws (EO 596; RA 10149), such entities remain tax-exempt under RA 7160, Section 133(o), and Section 234(a), unless beneficial use is granted to a taxable person.
Exemption from Real Property Tax
PHC’s properties, as public dominion devoted to public use or service, are exempt from real property tax under Section 234(a), RA 7160, and Civil Code Article 420. Jurisprudence (MIAA, PFDA cases, MWSS) affirms that government instrumentalities vested with corporate powers enjoy local tax immunity.
Limitations on Taxation of Leased Properties
Section 234(a) provides an exception when
Case Syllabus (G.R. No. 225409)
Facts
- The Philippine Heart Center (PHC) was established in 1975 under Presidential Decree No. 673 as a specialty hospital for cardiovascular care, especially for the poor.
- PD 673 granted the PHC corporate powers to acquire, mortgage, lease, sell and dispose of properties, and exempted it from all taxes, charges, and fees for ten years.
- Letter of Instruction No. 1455 (1985) extended the PHC’s tax exemption “without interruption.”
- The PHC owned eleven land parcels and buildings in Quezon City under various tax declarations.
- In 2004, Quezon City issued Notices of Delinquency for unpaid real property taxes totaling ₱36,530,545.00; upon non-payment, the City Treasurer levied on the properties.
- The PHC sought condonation or reduction from President Gloria Macapagal-Arroyo and later entered into two Memoranda of Agreement (2006 and 2010) to provide free medical services in lieu of payment; both were suspended after an OGCC memorandum advised suspension pending Supreme Court’s ruling in MIAA v. Court of Appeals.
- In June–July 2011, after issuing new delinquency notices and a Warrant of Levy, Quezon City publicly auctioned and purchased the PHC properties.
- On September 1, 2011, the PHC filed a petition for certiorari with the Court of Appeals (CA), challenging the assessment, levy, and sale as grave abuse of discretion and asserting tax exemption under PD 673, LOI 1455, the 1987 Constitution, RA 7160 and relevant jurisprudence.
Procedural History
- CA Decision (September 25, 2012): Dismissed PHC’s petition for failure to exhaust administrative remedies under Section 252, RA 7160.
- CA Resolution (March 18, 2013): Reinstated the petition, recognizing exceptions to exhaustion due to auction sale of properties and urgency of judicial intervention.
- CA Resolution (September 27, 2013): Denied motion for reconsideration on deposit requirement under Section 267, RA 7160, holding it inapplicable to tax-exempt government entities.
- CA Decision (March 15, 2016): Dismissed the petition anew, ruling certiorari was the wrong remedy against administrative acts of assessment, levy, and sale.
- CA Resolution (June 23, 2016)