LUNG CENTER OF THE PHILIPPINES vs. QUEZON CITY and CONSTANTINO P.

ROSAS, in his capacity as

City Assessor of Quezon City
G.R. No. 144104 JUNE 29, 2004
EN BANC, CALLEJO, SR. J.

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
is erected. A big space in the ground floor of the hospital is being leased to private parties, for
canteen and small 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 private enterprise known as the Elliptical Orchids and Garden Center.

When the City Assessor of Quezon City assessed both its land and hospital building for real property
taxes, the Lung Center of the Philippines filed a claim for exemption on its averment that it is a
charitable 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 for exemption
was denied, prompting a petition for the reversal of the resolution of the City Assessor with the 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 board’s decision, finding that Lung
Center of the Philippines is not a charitable institution and that its properties were not actually,
directly and 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 the Constitution, notwithstanding that it accepts paying patients and rents out portions
of the hospital building to private individuals and enterprises.

Issue(s): Is the Lung Center of the Philippines a charitable institution within the context of the
Constitution, and therefore, exempt from real property tax?

Decision: The Lung Center of the Philippines is a charitable institution. To determine whether an
enterprise is a charitable institution or not, the elements which should be considered include the
statute creating the 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, there must be
clear and unequivocal proof that (1) it is a charitable institution and (2)its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. While portions of the hospital
are used for treatment of patients and the dispensation of medical services to them, whether
paying or non-paying, other portions thereof are being leased to private individuals and
enterprises. Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from
participation or enjoyment. 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.