LUNG CENTER v.

QUEZON CITY

G.R. No. 144104 June 29, 2004

LUNG CENTER OF THE PHILIPPINES, petitioner,

vs.
QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of Quezon
City, respondents.

Facts:

The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established by
virtue of P.D. 1823. It owns a parcel of land in Quezon City with a hospital built at its center.
Other parts of the lot were used for private and commercial purposes, while others were vacant
and idle.

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.

After the land and the building were assessed for real property taxes, petitioner filed a Claim of
Exemption from real property taxes with the City Assessor, stating that it is a charitable
institution.
The petition was denied. Hence, this case.

Petitioner argues that it is a charitable institution within the context of Section 28(3), Article VI of
the 1987 Constitution.1 The petitioner further contends that even if P.D. No. 1823 does not
exempt it from the payment of real estate taxes, it is not precluded from seeking tax exemption
under the 1987 Constitution.

Respondents aver that petitioner’s real property is not exempt from the payment of real estate
taxes under P.D. No. 1823 and even under the 1987 Constitution because it failed to prove that
it is a charitable institution and that the said property is actually, directly and exclusively used for
charitable purposes.

Issue:
1. Whether the petitioner is a charitable institution within the context of Presidential Decree
No. 1823 and the 1973 and 1987 Constitutions
2. Whether the real properties of the petitioner are exempt from real property taxes.

Ruling:

1. Yes, petitioner is a charitable institution. For an institution to be considered

charitable, the following elements must be present:
(1) the statute creating the enterprise;
(2) its corporate purposes;
(3) its constitution and by-laws;
(4) the methods of administration;
(5) the nature of the actual work performed;
(6) the character of the services rendered;
(7) the indefiniteness of the beneficiaries; and

1
Section 28
x x x 3. Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious,
charitable, or educational purposes shall be exempt from taxation.
 (8) the use and occupation of the properties.

2. Yes, the property is exempted from real property tax BUT ONLY PARTIALLY.
Those portions of its 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.

The settled rule in this jurisdiction is that laws granting exemption from tax are
construed strictissimi juris against the taxpayer and liberally in favor of the taxing
power. The effect of an exemption is equivalent to an appropriation. Hence, a claim for
exemption from tax payments must be expressly stated in its charter. Moreover, the tax
exemption under Sec. 28 (3) covers property taxes only, which means that what is
exempted is not the institution itself; those exempted from real estate taxes are lands,
buildings and improvements actually, directly and exclusively used for religious,
charitable or educational purposes.

In this case, under PD 1823, the petitioner does not enjoy any tax exemption privileges
for its real properties as well as the building constructed thereon. If the intention were to
include such tax privileges, the decree would have expressly stated so. Moreover, the
petitioner failed to prove that the entirety of its real property is actually, directly and
exclusively used for charitable purposes. While portions of the hospital are used for the
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 for their
clinics and a canteen.

Dispositive:

The petition is PARTIALLY GRANTED. The respondent Quezon City Assessor is

hereby DIRECTED to determine, after due hearing, the precise portions of the land and
the area thereof which are leased to private persons, and to compute the real property
taxes due thereon as provided for by law.