Case Digest: Lung Center of the Philippines vs. Quezon City and Constantino Rosas

G.R. No. 144104             June 29, 2004

FACTS:

The Petitioner is a non-stock, non-profit entity which owns a parcel of land in Quezon City.  Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines.  The ground floor is being leased to a canteen, medical professionals whom use the same as their private clinics, as well as to other private parties.  The right portion of the lot is being leased for commercial purposes to the Elliptical Orchids and Garden Center.  The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from the government.

Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5 million, predicating its claim as a charitable institution. The city assessor denied the Claim.  When appealed to the QC-Local Board of Assessment, the same was dismissed.  The decision of the QC-LBAA was affirmed by the Central Board of Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are used exclusively for charity.

ISSUE:

Whether or not the Petitioner is entitled to exemption from realty taxes notwithstanding the fact that it admits paying clients and leases out a portion of its property for commercial purposes.

HELD:

The Court held that the petitioner is indeed a charitable institution based on its charter and articles of incorporation.  As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.

Despite this, the Court held that the portions of real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes.  (strictissimi juris) Moreover, P.D. No. 1823 only speaks of tax exemptions as regards to:

•         income and gift taxes for all donations, contributions, endowments and equipment and supplies to be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the Philippines for the actual use and benefit of the Lung Center; and
•          taxes, charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to equipment purchases (expression unius est exclusion alterius/expressium facit cessare tacitum).