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Lung Center of the Philippines vs. Quezon City [GR No. 144104 June 29, 2004]

Post under case digests , Taxation at Tuesday, March 20, 2012 Posted by Schizophrenic Mind

Facts: Lung Center of the Philippines is a non-stock and non-profit entity established by virtue of PD No.1823. It is the registered owner of the land on which the Lung Center of the Philippines Hospital iserected. A big space in the ground floor of the hospital is being leased to private parties, for canteen andsmall store spaces, and to medical or professional practitioners who use the same as their private clinics.Also, a big portion on the right side of the hospital is being leased for commercial purposes to a privateenterprise known as the Elliptical Orchids and Garden Center.

When the City Assessor of Quezon City assessed both its land and hospital building for realproperty taxes, the Lung Center of the Philippines filed a claim for exemption on its averment that it is acharitable institution with a minimum of 60% of its hospital beds exclusively used for charity patients

and that the major thrust of its hospital operation is to serve charity patients. The claim forexemption was denied, prompting a petition for the reversal of the resolution of the City Assessor withthe Local Board of Assessment Appeals of Quezon City, which denied the same. On appeal, the Central

Board of Assessment Appeals of Quezon City affirmed the local boards decision, finding that LungCenter of the Philippines is not a charitable institution and that its properties were not actually, directlyand exclusively used for charitable purposes. Hence, the present petition for review with averments that

the Lung Center of the Philippines is a charitable institution under Section 28(3), Article VI of theConstitution, notwithstanding that it accepts paying patients and rents out portions of the hospital

building to private individuals and enterprises.

Issue: Is the Lung Center of the Philippines a charitable institution within the context of the Constitution,

and therefore, exempt from real property tax?

Held: The Lung Center of the Philippines is a charitable institution. To determine whether an enterpriseis a charitable institution or not, the elements which should be considered include the statute creatingthe enterprise, its corporate purposes, its constitution and by-laws, the methods of administration, the

nature of the actual work performed, that character of the services rendered, the indefiniteness of the

beneficiaries and the use and occupation of the properties.

However, under the Constitution, in order to be entitled to exemption from real property tax, theremust be clear and unequivocal proof that (1) it is a charitable institution and (2)its real properties areACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. While portions of the hospital are

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used for treatment of patients and the dispensation of medical services to them, whether paying or non-

paying, other portions thereof are being leased toprivate individuals and enterprises.

Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from participation orenjoyment. If real property is used for one or more commercial purposes, it is not exclusively used for

the exempted purposes but is subject to taxation.