6. LUNG CENTER v. QUEZON CITY, G.R. No.
144104, June 29, 2004 performed, the character of the services rendered, the indefiniteness of the
FACTS: The petitioner Lung Center of the Philippines is a non-stock and non-profit
entity established by virtue of Presidential Decree No. 1823. It owns a piece of land
located a t Quezon City. Erected in the middle of the aforesaid lot is a hospital
known as the Lung Center of the Philippines. A big space at the ground floor is being
leased to private parties for canteen and small stores and to medical and to
professional practitioners. A big portion of the lot is being leased for commercial
purposes to a private enterprise who use the same as their private clinics for their
patients whom they charge for their professional services. Almost one-half of the
entire area on the left side of the building along Quezon Avenue is vacant and idle,
while a big portion on the right side, at the corner of Quezon Avenue and Elliptical
Road, is being leased for commercial purposes to a private enterprise known as the
Elliptical Orchids and Garden Center. In 1993, both land and the hospital building
were assessed for real property taxes in the amount of about Php 4.5 Million by the
City Assessor of Quezon. The petitioner avers that it is a charitable institution within
the context of Section 28(3), Article VI of the 1987 Constitution. It asserts that its
character as a charitable institution is not altered by the fact that it admits paying
patients and renders medical services to them, leases portions of the land to private
parties, and rents out portions of the hospital to private medical practitioners from
which it derives income to be used for operational expenses.
ISSUES:
2.
1. Whether the petitioner is a charitable institution within the context of
Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and
Section 234(b) of Republic Act No. 7160;
2. Whether the real properties of the petitioner are exempt from real property
taxes.
HELD:
1. YES. Petitioner is a charitable institution within the context of the 1973 and
1987 Constitutions. To determine whether an enterprise is a charitable
institution/entity 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
beneficiaries, and the use and occupation of the properties. Under P.D. No.
1823, the petitioner is a non-profit and non-stock corporation which, subject
to the provisions of the decree, is to be administered by the Office of the
President of the Philippines with the Ministry of Health and the Ministry of
Human Settlements. It was organized for the welfare and benefit of the
Filipino people principally to help combat the high incidence of lung and
pulmonary diseases in the Philippines. 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. The money
received by the petitioner becomes a part of the trust fund and must be
devoted to public trust purposes and cannot be diverted to private profit or
benefit. Under P.D. No. 1823, the petitioner is entitled to receive donations.
The petitioner does not lose its character as a charitable institution simply
because the gift or donation is in the form of subsidies granted by the
government. In this case, the petitioner adduced substantial evidence that it
spent its income, including the subsidies from the government for 1991 and
1992 for its patients and for the operation of the hospital. It even incurred a
net loss in 1991 and 1992 from its operations.
We hold that the portions of the land leased to private entities as well as
those parts of the hospital leased to private individuals are not exempt from
such taxes. On the other hand, the portions of the land occupied by the
hospital and portions of the hospital used for its patients, whether paying or
non-paying, are exempt from real property taxes. Under the 1973 and 1987
Constitutions and Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is burdened to prove, by clear and unequivocal
proof, that (a) it is a charitable institution; and (b) its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable
purposes. Exclusive is defined as possessed and enjoyed to the exclusion of
others; debarred from participation or enjoyment; and exclusively is
defined, in a manner to exclude; as enjoying a privilege exclusively.[40] 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.The
1
 words dominant use or principal use cannot be substituted for the words
used exclusively without doing violence to the Constitutions and the law.
Solely is synonymous with exclusively.
What is meant by actual, direct and exclusive use of the property for
charitable purposes is the direct and immediate and actual application of the
property itself to the purposes for which the charitable institution is
organized. It is not the use of the income from the real property that is
determinative of whether the property is used for tax-exempt purposes. The
petitioner failed to discharge its burden 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. Further, a portion of the land is being leased to a private
individual for her business enterprise under the business name Elliptical
Orchids and Garden Center. Indeed, the petitioners evidence shows that it
collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from
the said lessees.
7. OLIVARES vs MARQUEZ, G.R. No. 155591, September 22, 2004
FACTS: The Paranaque City Treasurer served final notices of real estate tax
delinquency on Olivares et al., who protested the assessments on 5 grounds
(prescription under LGC 194, double assessment, non-existence of properties taxed,
tax exemption, and errors in assessment). The City Treasurer did not act on the
protest, so Olivares et al. filed a petition with the Paranaque RTC questioning the
assessment and levy made on their properties. The City Treasurer and other LGU
officials impleaded filed MTD, claiming that the RTC had no jurisdiction; that
Olivares et al. failed to exhaust administrative remedies; and that there was no cause
of action. RTC dismissed the case, hence this petition for review filed by Olivares
et.al. with the SC.
ISSUE: Was the remedy of certiorari to the SC proper in this case?
RULING: NO. Certiorari, prohibition, and mandamus will not lie if administrative
remedies have not been exhausted. Olivares et al. failed to justify their non-
exhaustion of administrative remedies as their complaint did not really assail the
power and authority of the City Officials to assess and collect realty tax on their
properties [as they assert, citing the ruling in Ty v. Trampe]. The allegations against
the taxing authority of the officials were inserted simply to place the petition within
the Ty exception. A perusal of the petition filed shows that it was assailing the
correctness of the assessments. Such a case is properly resolved through the
administrative procedure provided for under the LGC. Moreover, the grounds raised
involve factual questions which are more properly resolved by the LBAA.
DOCTRINE: The extraordinary remedies of certiorari, prohibition and mandamus
may be resorted to only when there is no other plain, available, speedy and adequate
remedy in the course of law. Where administrative remedies are available, petitions
for the issuance of these peremptory writs do not lie in order to give the
administrative body the opportunity to decide the matter by itself correctly and to
prevent unnecessary and premature resort to courts. Under the doctrine of primacy of
administrative remedies, an error in the assessment must be administratively pursued
to the exclusion of ordinary courts whose decisions would be void for lack of
jurisdiction. But an appeal shall not suspend the collection of the tax assessed
without prejudice to a later adjustment pending the outcome of the appeal.
In Ty v. Trampe, jurisdiction was properly vested in the trial court because the
petition was questioning the very authority and power of the assessor - acting solely
and independently - to impose the assessment, and of the treasurer to collect; and not
merely of amounts of the increase in the tax.
Procedure/Remedies for assailing real property tax assessment under the LGC: Pay
under protest; if protest unacted upon within 60 days from filing or denied, appeal to
LBAA; if denied, appeal to CBAA; then appeal to CA under ROC 43.
8. Luz Yamane vs BA Lepanto Condominium Corporation
FACTS: BA-Lepanto Condominium Corporation is a condominium corporation
constituted in accordance with the Condominium Act, which owns and holds title to
the common and limited common areas of the BA-Lepanto Condominium situated in
Makati City. The Corporation is authorized, under its Amended By-Laws, to collect
regular assessments from its members for operating expenses, capital expenditures
on the common areas, and other special assessments as provided for in the Master
Deed with Declaration of Restrictions of the Condominium. The Corporation
2
received a Notice of Assessment signed by the City Treasurer. The Notice of
Assessment stated that the Corporation is “liable to pay the correct city business
taxes.” The Notice of Assessment was silent as to the statutory basis of the business
taxes assessed. The Corporation responded with a written tax protest addressed to the
City Treasurer. According to respondent, under both the Makati Code and the Local
Government Code, “business” is defined as “trade or commercial activity regularly
engaged in as a means of livelihood or with a view to profit.” It was submitted that
the Corporation, as a condominium corporation, was organized not for profit, but to
hold title over the common areas of the Condominium, to manage the Condominium
for the unit owners, and to hold title to the parcels of land on which the
Condominium was located. Neither was the Corporation authorized, under its articles
of incorporation or by-laws to engage in profit-making activities. The assessments it
did collect from the unit owners were for capital expenditures and operating
expenses. The protest was rejected by the City Treasurer and insisted that the
collection of dues from the unit owners was effected primarily “to sustain and
maintain the expenses of the common areas, with the end in view of getting full
appreciative living values for the individual condominium occupants and to
command better marketable prices for those occupants” who would in the future sell
their respective units. In short, the petitioner avers that it is engaged in business for
profit making. Because of the denial of the protest, respondent filed an Appeal with
the RTC of Makati. However, the latter dismissed the case. As a recourse,
respondent filed a Petition for Review under Rule 42 of the Rules of Civil Procedure
with the CA. It was dismissed outright because only decisions of the RTC brought on
appeal from a first level court could be elevated for review under Rule 42. However,
it was reinstated by the CA because of Sec. 195 of the LGC stating that the remedy
of the taxpayer on the denial of the protest filed with the local treasurer is to appeal
the denial with the court of competent jurisdiction. Afterwards, the CA reversed the
ruling of the RTC.
ISSUE: Whether or not the City of Makati may collect business taxes on
condominium corporations.
RULING: No. Section 143 of the Code specifically enumerates several types of
business on which municipalities and cities may impose taxes. However, the
Corporation does not fall under such law. Moreover, nowhere in the Makati Revenue
Code that would serve as the legal authority for the collection of business taxes from
condominiums in Makati. We can elicit from the Condominium Act that a
condominium corporation is precluded by statute from engaging in corporate
activities other than the holding of the common areas, the administration of the
condominium project, and other acts necessary, incidental or convenient to the
accomplishment of such purposes. Neither the maintenance of livelihood, nor the
procurement of profit, fall within the scope of permissible corporate purposes of a
condominium corporation under the Condominium Act. None of these stated
corporate purposes are geared towards maintaining a livelihood or the obtention of
profit. Even though the Corporation is empowered to levy assessments or dues from
the unit owners, these amounts collected are not intended for the incurrence of profit
by the Corporation or its members, but to shoulder the multitude of necessary
expenses that arise from the maintenance of the Condominium Project.
9. GSIS vs. City Assessor of Iloilo City, G.R. No. 147192. June 27, 2006
FACTS: In the two cadastral cases, private respondent Rosalina Francisco petitioned
for the issuance of new transfer certificates of title (TCTs) in her name over two
parcels of land. Private respondent Francisco purchased the subject properties in the
auction sales held for the satisfaction of delinquent real property taxes. After the
lapse of the one-year redemption period and the failure of the registered owner or
any interested person to redeem the properties, the Iloilo City Treasurer issued the
corresponding final bill of sale to private respondent. The sales were later on duly
annotated on the certificates of title on file with the Register of Deeds. However, the
final bill of sale could not be registered because the owner’s duplicate certificate of
title was unavailable at that time. To effect registration in her name, private
respondent instituted separate petitions for the entry of title in her name over the two
lots with the RTCs of Iloilo City. Both petitions were unopposed and the RTC issued
separate orders directed the issuance of new duplicate TCTs. No appeal was made
from both orders of the courts a quo, hence, they became final and executory.
In a petition to annul the judgment of the trial court, petitioner, claimed that the
assessment of real property taxes on it (GSIS) was void since, under its charter (RA
8291), it was exempt from all forms of taxes (including real property taxes on the
properties held by it) that were due to the local governments where such properties
were located. Furthermore, it claimed that the proceedings in the assessment and
levy of said taxes, as well as the sale of the properties at public auction, were held
without notice to it, hence, its right to due process was violated. In support of its
position, petitioner points to Section 39 of RA 8291. The CA gave no credence to the
arguments of petitioner and dismissed its petition.
3
ISSUE: Should GSIS be exempt from payment of real property tax?
RULING: No, even if the charter of the GSIS generally exempts it from tax
liabilities, the prescription is not so encompassing as to make the tax exemption
applicable to the properties in dispute here. In the early case of City of Baguio v.
Busuego, we held that the tax-exempt status of the GSIS could not prevent the
accrual of the real estate tax liability on properties transferred by it to a private buyer
through a contract to sell. In the present case, GSIS had already conveyed the
properties to private persons thus making them subject to assessment and payment of
real property taxes. The alienation of the properties sold by GSIS was the proximate
cause and necessary consequence of the delinquent taxes due.
The doctrine laid down in City of Baguio is reflected in Section 234 (a) of the LGC,
which states: Section 234. Exemptions from Real Property Tax. — The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.
ISSUE: Did RA 8291, which took effect in 1997, abrogated Section 234 (a) of the
LGC of 1991?
RULING: No. The abrogation or repeal of a law cannot be assumed; the intention to
revoke must be clear and manifest. RA 8291 made no express repeal or abrogation of
the provisions of RA 7160, particularly Section 234 (a) thereof. Repeal by
implication in this case is not at all convincing either. To bring about an implied
repeal, the two laws must be absolutely incompatible. They must be clearly
repugnant in a way that the later law (RA 8291) cannot exist without nullifying the
prior law (RA 7160). Indeed, there is nothing in RA 8291 which abrogates, expressly
or impliedly, that particular provision of the LGC. The two statutes are not
inconsistent on that specific point, let alone so irreconcilable as to compel us to
uphold one and strike down the other. The rule is that every statute must be
interpreted and brought into accord with other laws in a way that will form a uniform
system of jurisprudence. The legislature is presumed to have known existing laws on
the subject and not to have enacted conflicting laws. Thus, the legislature cannot be
presumed to have intended Section 234 (a) to run counter to Section 39 of RA 8291.
Lastly, even if we were to construe that RA 8291 abrogated Section 234(a) of the
LGC, still it cannot be made to apply retroactively without impairing the vested
rights of private respondent.
10. GOVERNMENT SERVICE INSURANCE SYSTEM v. CITY
TREASURER and CITY ASSESSOR of the CITY OF MANILA, G.R. No.
186242 December 23, 2009
Facts: Petitioner GSIS owns or used to own two (2) parcels of land, Katigbak
property and Concepcion-Arroceros property. Concepcion-Arroceros property title
was transferred to this Court in 2005 pursuant to Proclamation No. 8353 dated April
27, 2005. Both the GSIS and the Metropolitan Trial Court (MeTC) of Manila occupy
the Concepcion-Arroceros property, while the Katigbak property was under lease.
The controversy started when the City Treasurer of Manila addressed a letter dated
September 13, 2002 to GSIS President and General Manager Winston F. Garcia
informing him of the unpaid real property taxes due for years 1992 to 2002, broken
down as follows: (a) PhP 54,826,599.37 for the Katigbak property; and (b) PhP
48,498,917.01 for the Concepcion-Arroceros property. The letter warned of the
inclusion of the subject properties in the scheduled October 30, 2002 public auction
of all delinquent properties in Manila should the unpaid taxes remain unsettled
before that date. On September 16, 2002, the City Treasurer of Manila issued
separate Notices of Realty Tax Delinquency for the subject properties, with the usual
warning of seizure and/or sale. On October 8, 2002, GSIS, through its legal counsel,
wrote back emphasizing the GSIS’ exemption from all kinds of taxes, including
realty taxes, under Republic Act No. (RA) 8291.
Two days after, GSIS filed a petition for certiorari and prohibition with prayer for a
restraining and injunctive relief before the Manila RTC. In it, GSIS prayed for the
nullification of the assessments thus made and that respondents City of Manila
officials be permanently enjoined from proceedings against GSIS’ property. GSIS
would later amend its petition to include the fact that: (a) the Katigbak property,
covered by TCT Nos. 117685 and 119465 in the name of GSIS, has, since November
1991, been leased to and occupied by the Manila Hotel Corporation (MHC), which
has contractually bound itself to pay any realty taxes that may be imposed on the
subject property; and (b) the Concepcion-Arroceros property is partly occupied by
GSIS and partly occupied by the MeTC of Manila.
RTC: dismissed GSIS’ petition
4
MR: denied
Hence, this petition.
Issue:
1. whether GSIS under its charter is exempt from real property taxation
2. assuming that it is so exempt, whether GSIS is liable for real property taxes for its
properties leased to a taxable entity
3. whether the properties of GSIS are exempt from levy.
Ruling:
1. Yes. GSIS Exempt from Real Property Tax
Full tax exemption granted through PD 1146
In 1936, Commonwealth Act No. (CA) 18611 was enacted abolishing the then
pension systems under Act No. 1638, as amended, and establishing the GSIS to
manage the pension system, life and retirement insurance, and other benefits of all
government employees. Under what may be considered as its first charter, the GSIS
was set up as a non-stock corporation managed by a board of trustees. Notably,
Section 26 of CA 186 provided exemption from any legal process and liens but only
for insurance policies and their proceeds. In 1977, PD 1146,12 otherwise known as
the Revised Government Service Insurance Act of 1977, was issued, providing for an
expanded insurance system for government employees. Sec. 33 of PD 1146 provided
for a new tax treatment for GSIS.
RA 7160 lifted GSIS tax exemption
Then came the enactment in 1991 of the LGC or RA 7160, providing the exercise of
local government units (LGUs) of their power to tax, the scope and limitations
thereof,14 and the exemptions from taxations. Of particular pertinence is the general
provision on withdrawal of tax exemption privileges in Sec. 193 of the LGC, and the
special provision on withdrawal of exemption from payment of real property taxes in
the last paragraph of the succeeding Sec. 234RA 7160 lifted GSIS tax exemption.
Significantly, the Court, in City of Davao, stated the observation that the GSIS’ tax-
exempt status withdrawn in 1992 by the LGC was restored in 1997 by RA 8291.
Full tax exemption reenacted through RA 8291
Indeed, almost 20 years to the day after the issuance of the GSIS charter, i.e., PD
1146, it was further amended and expanded by RA 8291 which took effect on June
24, 1997.18 Under it, the full tax exemption privilege of GSIS was restored, the
operative provision being Sec. 39 thereof, a virtual replication of the earlier quoted
Sec. 33 of PD 1146. Given the foregoing perspectives, the following may be
assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax exemption from real
estate taxes, among other tax burdens, until January 1, 1992 when the LGC took
effect and withdrew exemptions from payment of real estate taxes privileges granted
under PD 1146; (2) RA 8291 restored in 1997 the tax exempt status of GSIS by
reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146;19 and (3) If any
real estate tax is due to the City of Manila, it is, following City of Davao, only for the
interim period, or from 1992 to 1996, to be precise.
Real property taxes assessed and due from GSIS considered paid
While recognizing the exempt status of GSIS owing to the reenactment of the full tax
exemption clause under Sec. 39 of RA 8291 in 1997, the ponencia in City of Davao
appeared to have failed to take stock of and fully appreciate the all-embracing
condoning proviso in the very same Sec. 39 which, for all intents and purposes,
considered as paid "any assessment against the GSIS as of the approval of this Act."
GSIS an instrumentality of the National Government
First, Apart from the foregoing consideration, the Court’s fairly recent ruling in
Manila International Airport Authority v. Court of Appeals,20 a case likewise
involving real estate tax assessments by a Metro Manila city on the real properties
administered by MIAA, argues for the non-tax liability of GSIS for real estate taxes.
There, the Court held that MIAA does not qualify as a GOCC, not having been
organized either as a stock corporation, its capital not being divided into shares, or as
5
a non-stock corporation because it has no members. MIAA is rather an
instrumentality of the National Government and, hence, outside the purview of local
taxation by force of Sec. 133 of the LGC providing in context that "unless otherwise
provided," local governments cannot tax national government instrumentalities.
Second, the subject properties under GSIS’s name are likewise owned by the
Republic. The GSIS is but a mere trustee of the subject properties which have either
been ceded to it by the Government or acquired for the enhancement of the system.
Third, GSIS manages the funds for the life insurance, retirement, survivorship, and
disability benefits of all government employees and their beneficiaries. This
undertaking, to be sure, constitutes an essential and vital function which the
government, through one of its agencies or instrumentalities, ought to perform if
social security services to civil service employees are to be delivered with reasonable
dispatch.
2. Beneficial Use Doctrine Applicable
The provisions allow the Republic to grant the beneficial use of its property to an
agency or instrumentality of the national government. Such grant does not
necessarily result in the loss of the tax exemption. The tax exemption the property of
the Republic or its instrumentality carries ceases only if, as stated in Sec. 234(a) of
the LGC of 1991, "beneficial use thereof has been granted, for a consideration or
otherwise, to a taxable person." GSIS, as a government instrumentality, is not a
taxable juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in a
sense that status with respect to the Katigbak property when it contracted its
beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax
assessment of PhP 54,826,599.37 covering 1992 to 2002 over the subject Katigbak
property is valid insofar as said tax delinquency is concerned as assessed over said
property.
The next query as to which between GSIS, as the owner of the Katigbak property, or
MHC, as the lessee thereof, is liable to pay the accrued real estate tax, need not
detain us long. MHC ought to pay. Being in possession and having actual use of the
Katigbak property since November 1991, MHC is liable for the realty taxes assessed
over the Katigbak property from 1992 to 2002.
The foregoing is not all. As it were, MHC has obligated itself under the GSIS-MHC
Contract of Lease to shoulder such assessment. As a matter of law and contract,
therefore, MHC stands liable to pay the realty taxes due on the Katigbak property.
Considering, however, that MHC has not been impleaded in the instant case, the
remedy of the City of Manila is to serve the realty tax assessment covering the
subject Katigbak property to MHC and to pursue other available remedies in case of
nonpayment, for said property cannot be levied upon as shall be explained below.
3. GSIS Properties Exempt from Levy
In light of the foregoing disquisition, the issue of the propriety of the threatened levy
of subject properties by the City of Manila to answer for the demanded realty tax
deficiency is now moot and academic. A valid tax levy presupposes a corresponding
tax liability. Nonetheless, it will not be remiss to note that it is without doubt that the
subject GSIS properties are exempt from any attachment, garnishment, execution,
levy, or other legal processes.
SUMMARY
In sum, the Court finds that GSIS enjoys under its charter full tax exemption.
Moreover, as an instrumentality of the national government, it is itself not liable to
pay real estate taxes assessed by the City of Manila against its Katigbak and
Concepcion-Arroceros properties. Following the "beneficial use" rule, however,
accrued real property taxes are due from the Katigbak property, leased as it is to a
taxable entity. But the corresponding liability for the payment thereof devolves on
the taxable beneficial user. The Katigbak property cannot in any event be subject of a
public auction sale, notwithstanding its realty tax delinquency. This means that the
City of Manila has to satisfy its tax claim by serving the accrued realty tax
assessment on MHC, as the taxable beneficial user of the Katigbak property and, in
case of nonpayment, through means other than the sale at public auction of the leased
property.
11. RCPI vs. PROVINCIAL ASSESOR OF SOUTH COTABATO,
PROVINCIAL TREASURER OF SOUTH COTABATO, MUNICIPAL
ASSESSOR OF TUPI, SOUTH COTABATO, and MUNICIPAL TREASURER
OF TUPI, SOUTH COTABATO, G.R. No. 144486. April 13, 2005
6
Facts: R.A. No. 2036 of 1957, as amended by R.A. No. 4054, granted RCPI a 50-
year franchise. Thus, Sec. 14 of the amended law, in gist, provides that the grantee
shall pay the same taxes as may be required by law. Said tax shall be in lieu of any
and all taxes of any kind, nature or description levied, established or collected by any
authority whatsoever, municipal, provincial or national, from which taxes the grantee
is hereby expressly exempted. On 10 June 1985, the municipal treasurer of Tupi,
South Cotabato assessed RCPI real property taxes from 1981 to 1985. The municipal
treasurer demanded that RCPI pay P166,810 as real property tax on its radio station
building in Barangay Kablon, as well as on its machinery shed, radio relay station
tower and its accessories, and generating sets, based on the following tax
declarations. RCPI protested the assessment before the Local Board of Assessment
Appeals (LBAA') and claimed that all its assessed properties are personal properties
and thus exempt from the real property tax. It also pointed out that its franchise
exempts RCPI from 'paying any and all taxes of any kind, nature or description in
exchange for its payment of tax equal to one and one-half per cent on all gross
receipts from the business conducted under its franchise. It further claimed that any
deviation from its franchise would violate the non-impairment of contract clause of
the Constitution. Finally, RCPI stated that the value of the properties assessed has
depreciated since their acquisition in the 1960s. The Provincial Assessor of South
Cotabato opposed RCPI's claims on all points. The Local Board of Assessment
Appeals ruled that appellant is ordered to pay the real property taxes, inclusive of all
penalties, surcharges and interest accruing as of the date of actual payment, on the
properties covered; in which the Central Board of Assessment Appeals affirmed. The
Appelate Court ruled that decision of the Central Board of Assessment Appeals is
hereby MODIFIED. Petitioner is declared exempt from paying the real property
taxes assessed upon its machinery and radio equipment mounted as accessories to its
relay tower. The decision assessing taxes upon petitioner's radio station building,
machinery shed, and relay station tower is, however, affirmed.
ISSUES:
1. Whether the appellate court erred when it excluded RCPI's tower, relay station
building, and machinery shed from tax exemption; and
2. Whether the appellate court erred when it did not resolve the issue of nullity of the
tax declarations and assessments due to non-inclusion of depreciation allowance.
RULING:
1. First, Congress passed the Local Government Code that withdrew all the tax
exemptions existing at the time of its passage including that of RCPI's. Second,
Congress enacted the franchise of telecommunications companies, such as Islacom,
Bell, Island Country, IslaTel, TeleTech, Major Telecoms, and Smart, with the 'in lieu
of all taxes' proviso. Third, Congress passed RA 7925 entitled 'An Act to Promote
and Govern the Development of Philippine Telecommunications and the Delivery of
Public Telecommunications Services' which, through Section 23, mandated the
equality of treatment of service providers in the telecommunications industry. The
existing legislative policy is clearly against the revival of the 'in lieu of all taxes'
clause in franchises of telecommunications companies. After the VAT on
telecommunications companies took effect on January 1, 1996, Congress never again
included the 'in lieu of all taxes' clause in any telecommunications franchise it
subsequently approved. RCPI cannot also invoke the equality of treatment clause
under Section 23 of Republic Act No. 7925. The franchises of the petitioners all
expressly declare that the franchisee shall pay the real estate tax, using words similar
to Section 14 of RA 2036, as amended. It is an elementary rule in taxation that
exemptions are strictly construed against the taxpayer and liberally in favor of the
taxing authority. It is the taxpayer's duty to justify the exemption by words too plain
to be mistaken and too categorical to be misinterpreted.
2.RCPI contends that the tax declarations and assessments covering its radio relay
station tower, radio station building, and machinery shed are void because the
assessors did not consider depreciation allowance in their assessments. The Court
have examined the records of this case and found that RCPI raised before the LBAA
and the CBAA the nullity of the assessments due to the non-inclusion of depreciation
allowance. Therefore, RCPI did not raise this issue for the first time. However, even
if the court considers this issue, under the Real Property Tax Code depreciation
allowance applies only to machinery and not to real property.
12. City of Davao vs RTC 467 SCRA 280.
Facts: The GSIS Davao City branch office received a Notice of Public Auction for
non-payment of realty taxes for the years 1992 to 1994 totaling ₱295,721.61.
However, the auction was enjoined thru a TRO issued by the RTC. At the pre-trial, it
was agreed that the sole issue for resolution was purely a question of law, that is,
whether Sections 234 and 534 of the Local Government Code, which have
withdrawn real property tax exemptions of government owned and controlled
corporations (GOCCs), have also withdrawn from the GSIS its right to be exempted
7
from payment of the realty taxes sought to be levied by Davao City. The RTC ruled
that GSIS retained its exemption, it cited Section 33 of Presidential Decree (P.D.)
No. 1146, the Revised Government Service Insurance Act of 1977, as amended by P.
D. No. 1981, which mandated such exemption. The RTC conceded that the tax
exempting statute, P.D. No. 1146, was enacted prior to the Local Government Code.
However, it noted that the earlier law had prescribed two conditions in order that the
tax exemption provided therein could be withdrawn by future enactments, namely:
(1) that Section 33 be expressly and categorically repealed by law; and (2) that a
provision be enacted to substitute the declared policy of exemption from any and all
taxes as an essential factor for the solvency of the GSIS fund. Both conditions had
not been satisfied by the LGU.
Issue: WON the exemption granted in Section 33 of P.D. No. 1146, as amended, was
effectively withdrawn upon the enactment of the Local Government Code,
particularly Sections 193 and 294 thereof.
Ruling: Yes, exemption was withdrawn. The court ruled that The second paragraph
of Section 33 of P.D. No. 1146, {“ "to substitute the declared policy of exemption
from any and all taxes as an essential factor for the solvency of the fund."} as
amended, effectively imposes restrictions on the competency of the Congress to
enact future legislation on the taxability of the GSIS. This places an undue restraint
on the plenary power of the legislature to amend or repeal laws, especially
considering that it is a lawmaker’s act that imposes such burden. Only the
Constitution may operate to preclude or place restrictions on the amendment or
repeal of laws. Constitutional dicta is of higher order than legislative statutes, and the
latter should always yield to the former in cases of irreconcilable conflict. The court
ruled that Section 33 of P.D. No. 1146 is contravenes the constitution because it is an
irrepealable law. It might be argued that Section 33 of P.D. No. 1146, as amended,
does not preclude the repeal of the tax-exempt status of GSIS, but merely imposes
conditions for such to validly occur. Yet these conditions, if honored, have the
precise effect of limiting the powers of Congress. Thus, the same rationale for
prohibiting irrepealable laws applies in prohibiting restraints on future amendatory
laws. Consistent with statutory construction that, “This legislature cannot bind a
future legislature to a particular mode of repeal. It cannot declare in advance the
intent of subsequent legislatures or the effect of subsequent legislation upon existing
statutes.” Thus, the two conditionalities of Section 33 cannot bear relevance on
whether the Local Government Code removed the tax-exempt status of the GSIS.
The express withdrawal of all tax exemptions accorded to all persons, natural or
juridical, as stated in Section 193 of the Local Government Code, applies without
impediment to the present case.
13. Republic vs Imperial Credit Corporation, G.R. No. 173088, June 25, 2008
FACTS: Respondent Imperial Credit Corporation is a corporation duly organized
and existing under the laws of the Philippines. On 07 March 1966, respondent
purchased from a certain Jose Tajon a parcel of land situated in Barrio Colaique
(now Barangay San Roque), Antipolo City, Rizal for the sum of P17, 986.00 as
evidenced by a Deed of Sale with Mortgage. On 14 February 2000, respondent filed
before the RTC of Antipolo City an application for registration of a parcel of land.
The application alleged, among others, that respondent subrogated former owner
Jose Tajon, who has been in open, continuous, exclusive and notorious possession
and occupation of the parcel of land, being a part of the alienable and disposable
lands of the public domain, under a bona fide claim of ownership since 12 June
1945, by virtue of Deed of Sale with Mortgage executed on 07 March 1966. At the
hearing, Ricardo Santos, respondent’s legal researcher and duly authorized attorney-
in-fact, testified on the fact of respondent’s actual possession through its caretaker,
Teodisia Palapus, who had been overseeing said property since its acquisition from
Jose Tajon. Palapus also corroborated Santos testimony and added that except for
some trespassers, no one else had laid possessory claim on the property. Aside from
the transfer documents, the other documentary evidence submitted consisted of a
1993 tax declaration, the tracing cloth plan, survey description, a certification from
the Land Management Sector in lieu of the geodetic engineers certificate and the
report by the Community Environment and Natural Resources Office that the
property falls within the alienable and disposable zone. The RTC rendered judgment
granting respondents application for registration. Petitioner Republic of the
Philippines, through the Office of the Solicitor General (OSG), seasonably appealed
from the RTCs Decision to the Court of Appeals, contending that respondent failed
to present incontrovertible evidence that respondent and its predecessor-in-interest
have been in open continuous, exclusive and notorious possession and occupation of
the property since 12 June 1945 or earlier.
ISSUE:
8
1. Whether or not respondent’s application for original registration of title under
Paragraph 1, Section 14 of P.D. 1529 should be granted?
2. If respondent does not qualify under Paragraph 1 of Section 14, may it still qualify
under Paragraphs 2 and 4 of Section 14 P.D. 1529?
RULING:
1. No. Respondent failed to comply with the requirements. Section 14, paragraph (1)
of P.D. No. 1529 states:
SEC. 14. Who may apply. - The following persons may file in the proper Court of
First Instance [now Regional Trial Court] an application for registration of title to
land, whether personally or through their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation of alienable
and disposable lands of the public domain under a bona fide claim of ownership
since June 12, 1945, or earlier.
It is doctrinally settled that a person who seeks confirmation of an imperfect or
incomplete title to a piece of land on the basis of possession by himself and his
predecessors-in-interest shoulders the burden of proving by clear and convincing
evidence compliance with the requirements of Section 48 (b) of Commonwealth Act
No. 141, as amended. A perusal of the records leads the Court to reverse the RTC's
conclusion that respondent's predecessor-in-interest possessed and occupied the
property as early as 12 June 1945. Respondent was able to trace back its alleged
possession and occupation of the property only as far back as 1966 when it acquired
the same from Jose Tajon. Other than the bare allegation in the petition, respondent's
evidence failed to show that Jose Tajon, respondent's predecessor-in-interest, had
occupied the property on 12 June 1945 or earlier.
The CENRO certification does not help respondent's cause. The Court held that all
the CENRO certification evidences is the alienability of the land involved, not the
open, continuous, exclusive and notorious possession and occupation thereof by the
respondent or its predecessors-in-interest for the period prescribed by law. The tax
declaration submitted in evidence could have clearly manifested respondent's adverse
claim on the property. While a tax declaration by itself is not sufficient to prove
ownership, it may serve as sufficient basis for inferring possession. However,
respondent submitted only one tax declaration filed belatedly in the year 1993. If
respondent genuinely and consistently believed its claim of ownership, it should
have regularly complied with its real estate tax obligations from the start of its
alleged occupation.
Paragraph (2) of Section 14, P.D. No. 1529 is inapplicable because the property
sought to be registered has not been clearly shown to be a private land. For a piece of
land to be qualified for registration under paragraph (2) of Section 14, P.D. No.
1529, the applicant must conclusively prove that the land is private and not part of
the public domain. Otherwise, if the land is part of the disposable zone of the public
domain, as in the instant case, the applicant must prove that he has complied with the
conditions under paragraph (1) of Section 14, P.D. No. 1529. This is premised on the
basic doctrine that all lands not otherwise appearing to be clearly within private
ownership are presumed to belong to the State. Respondent may neither apply for
registration under paragraph (4) of Section 14, P.D. No. 1529. Said provision
contemplates registration of lands acquired through modes other than those
specifically enumerated under Section 14, P.D. No. 1529. Respondent acquired an
alienable and disposable land of the public domain, thus, its application for
registration must comply with the requisites under paragraph (1) and not paragraph
(4) of Section 14.
14. PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY vs. CA, GR
NO. 150301 Oct. 2, 2007
FACTS: The controversy arose when respondent Municipality of Navotas assessed
the real estate taxes allegedly due from petitioner Philippine Fisheries Development
Authority on properties under its jurisdiction, management and operation located
inside the Navotas Fishing Port Complex (NFPC). The assessed taxes had remained
unpaid despite the demands made by the municipality which prompted it to give
notice to petitioner that the NFP& will be sold at public auction in order that the
municipality will be able to collect on petitioners delinquent realty taxes inclusive of
penalties. Petitioner sought the deferment of the auction sale claiming that the NFP&
is owned by the Republic of the Philippines, and pursuant to P.D. No. 977, it is not a
taxable entity. In view of the refusal of PFDA to pay the assessed realty taxes, the
9
matter was referred to the Department of Finance. DOF stated that the use of the
property should first be identified to determine its tax liability. If used by a non-
taxable person other than PFDA itself, it remains to be non-taxable. Otherwise, if
said properties are being used by taxable persons, same becomes taxable properties.
Notwithstanding the DOF’s instruction, respondent Municipality proceeded to
publish the notice of sale of NFPC in the issue of Balita, a local newspaper.
Petitioner instituted Civil Case against respondent Municipality, and its officers.
Petitioner asked the RTC to enjoin the auction of the NFPC on the ground that the
properties comprising the NFPC are owned by the Republic and thus, are exempt
from taxation. According to petitioner, only a small portion of NFPC which had been
leased to private parties may be subjected to real property tax which should be paid
by the latter. RTC issued a writ of preliminary injunction enjoining respondent
Municipality from proceeding with the public auction. Subsequently, RTC dismissed
the case and dissolved the writ of preliminary injunction, ruling in favor of the
Municipality’s right to collect said tax. The CA affirmed the ruling of the RTC.
Motion for reconsideration was filed but the same was denied by the CA.
ISSUES:
1. Whether or not the NFPC property is a property owned by the state and is intended
for public use and public service. As such, it is, hence, exempt from real property
tax.
2. Whether or not the NFPC can be sold at public auction to satisfy the tax
delinquency assessments made by the Municipality of Navotas on the entire
complex.
RULING:
1. Local government units, pursuant to the fiscal autonomy granted by the provisions
of Republic Act No. 7160 or the 1991 Local Government Code, can impose realty
taxes on juridical persons subject to the limitations enumerated in Section 133 of the
Code:
SEC. 133. Common Limitations on the Taxing Power of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following:
(o) taxes, fees, charges of any kind on the national government, its agencies and
instrumentalities, and local government units.
Nonetheless, the above exemption does not apply when the beneficial use of the
government property has been granted to a taxable person. Section 234 (a) of the
Code states that real property owned by the Republic of the Philippines or any of its
political subdivisions is exempted from payment of the real property tax except when
the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person. Thus, as a rule, petitioner PFDA, being an instrumentality of the
national government, is exempt from real property tax but the exemption does not
extend to the portions of the NFPC that were leased to taxable or private persons and
entities for their beneficial use.
2. NO. In consonance with the ruling in Philippine Fisheries Development Authority
v. Court of Appeals where this Court held that:
On the basis of the parameters set in the MIAA [Manila International Airport
Authority v. Court of Appeals case, the Authority should be classified as an
instrumentality of the national government. As such, it is generally exempt from
payment of real property tax, except those portions which have been leased to private
entities. The real property tax assessments issued by the City of Iloilo should be
upheld only with respect to the portions leased to private persons. 4n case the
Authority fails to pay the real property taxes due thereon, said portions cannot be
sold at a public auction to satisfy the tax delinquency. The port built by the State in
the Iloilo fishing complex is a property of public dominion and cannot therefore be
sold at public auction as provided for under Article 420 of the Civil Code.
Similarly, for the same reason, the NFPC cannot be sold at public auction in
satisfaction of the tax delinquency assessments made by the Municipality of Navotas
on the entire complex. Additionally, the land on which the NFPC property sits is a
reclaimed land, which belongs to the State. In Chavez v. Public Estates Authority,
the Court declared that reclaimed lands are lands of the public domain and cannot,
without Congressional fiat, be subject of a sale, public or private.
15. Philippines Ports Authority vs. City of Iloilo, G.R. no. 109791, July 14, 2003
10
Facts: PPA is created under PD 857 and under Section 25 of its charter, PPA is
exempted from paying real property tax. PPA is engaged in the business of arrastre
and stevedoring and leasing of real estate. Also, it owns a warehouse for itsoperation.
On June 11, 1984, PD 1931 withdrew all tax exemptions privileges granted to
GOCC. Thus, the city of Iloilo seeks to collect from PPA business tax and real
property tax from the last quarter of 1984 up to the year 1986. However, PPA claims
the ff:
(1) The City of Iloilo cannot collect real property taxes from PPA because the
warehouse is part of the port. Under Sectio 420 of Civil Code, ports are part of
public dominion.; (2) PPA is not subject to business tax because they are not engage
in business. Their leasing of its property was not motivated by profit but duly to
manage and control port operations.
Issue: Is PPA exempted from paying real property and business taxes?
Held: NO. PPA cannot claim such theory that their warehouse is a public dominion
because such theory is different from the theory they adopted and decided by the
lower court. It is contrary and inconsistent with its former pleading- PPA claimed it
is a GOCC and therefore exempt from paying the real property tax. Thus, PPA is
bound by its admission of ownership of the warehouse. It is therefore liable to pay
real property tax. Also, under Sec 420 of the Civil Code, the ports mentioned are
those constructed by the state. Thus, PPA should prove that its port was constructed
by the state in order to conclude that such property is a public dominion. However,
PPA failed to prove such. Also, granting that its port is a public dominion, its
warehouse which they constructed is considered to be an improvement and
improvements made by the occupants is not exempted from payment of tax. On their
second claim, PPA is liable for business tax for the lease of their buildings to private
corporations. During pre-trial,they did not refute the claims of the city of Iloilo that
they are engage in business nor did they present proof of exemption from tax. PPA
admitted that their act of leasing is not necessarily for government function of
administering ports but for convenience. Therefore, any income or profit generated
by the entity, even without any intention of realizing profit is still subject to business
tax. What matters is that PPA leased its properties to private entities and from which
PPA earned substantial income.
16. ANGELES UNIVERSITY FOUNDATION, vs. CITY OF ANGELES, G.R.
No. 189999 June 27, 2012
FACTS: Petitioner Angeles University Foundation (AUF) is an educational
institution and was converted into a non-stock, non-profit education foundation
under the provisions of Republic Act (R.A.) No. 6055. Petitioner filed with the
Office of the City Building Official an application for a building permit for the
construction of an 11-storey building of the Angeles University Foundation Medical
Center in its main campus located at MacArthur Highway, Angeles City, Pampanga.
Said office issued a Building Permit Fee Assessment in the amount of P126,839.20.
An Order of Payment was also issued by the City Planning and Development Office,
Zoning Administration Unit requiring petitioner to pay the sum of P238,741.64 as
Locational Clearance Fee. In separate letters addressed to respondents City Treasurer
Juliet G. Quinsaat and Acting City Building Official Donato N. Dizon, petitioner
claimed that it is exempt from the payment of the building permit and locational
clearance fees, citing legal opinions rendered by the Department of Justice. Despite
petitioners plea, however, respondents refused to issue the building permits for the
construction of the AUF Medical Center in the main campus and renovation of a
school building located at Marisol Village. Consequently, petitioner paid under
protest the fees and real property tax. Petitioner then filed a Complaint before the
trial court seeking the refund. Respondents asserted that the claim of petitioner
cannot be granted because its structures are not among those mentioned in Sec. 209
of the National Building Code as exempted from the building permit fee.
Respondents argued that R.A. No. 6055 should be considered repealed on the basis
of Sec. 2104 of the National Building Code. Since the disputed assessments are
regulatory in nature, they are not taxes from which petitioner is exempt. As to the
real property taxes imposed on petitioners property located in Marisol Village,
respondents pointed out that said premises will be used as a school dormitory which
cannot be considered as a use exclusively for educational activities.
ISSUEs:
1.Is the petitioner exempt from the payment of building permit and related
fees imposed under the National Building Code?
2.Is the parcel of land owned by petitioner which has been assessed for real
property tax likewise exempt?
RULING:
11
 1. No. Exempted from the payment of building permit fees are: (1) public
buildings and (2) traditional indigenous family dwellings. Not being expressly
included in the enumeration of structures to which the building permit fees do not
apply, petitioners claim for exemption rests solely on its interpretation of the term
other charges imposed by the National Government in the tax exemption clause of
R.A. No. 6055. R.A. No. 6055 granted tax exemptions to educational institutions like
petitioner which converted to non-stock, non-profit educational foundations. Section
8 of said law provides:
SECTION 8. The Foundation shall be exempt from the payment of all taxes, import
duties, assessments, and other charges imposed by the Government on all income
derived from or property, real or personal, used exclusively for the educational
activities of the Foundation.
Note that the other charges mentioned in Sec. 8 of R.A. No. 6055 is
qualified by the words imposed by the Government on all property used exclusively
for the educational activities of the foundation. Building permit fees are not
impositions on property but on the activity subject of government regulation. Since
building permit fees are not charges on property, they are not impositions from
which petitioner is exempt. As to petitioners argument that the building permit fees
collected by respondents are in reality taxes because the primary purpose is to raise
revenues for the local government unit, the same does not hold water. In
distinguishing tax and regulation as a form of police power, the determining factor is
the purpose of the implemented measure. If the purpose is primarily to raise revenue,
then it will be deemed a tax even though the measure results in some form of
regulation. On the other hand, if the purpose is primarily to regulate, then it is
deemed a regulation and an exercise of the police power of the state, even though
incidentally, revenue is generated.
2. No. Petitioner failed to discharge its burden to prove that its real
property is actually, directly and exclusively used for educational purposes. While
there is no allegation or proof that petitioner leases the land to its present occupants,
still there is no compliance with the constitutional and statutory requirement that said
real property is actually, directly and exclusively used for educational purposes. The
respondents correctly assessed the land for real property taxes for the taxable period
during which the land is not being devoted solely to petitioners educational activities.
Accordingly, the CA did not err in ruling that petitioner is likewise not entitled to a
refund of the real property tax it paid under protest.
17. NPC vs Quezon, GR 171586 25 Jan 2010
FACTS: The Province of Quezon assessed Mirant Pagbilao Corporation for
unpaid real property taxes in the amount of P1.5 Billion for the machineries located
in its power plant in Pagbilao, Quezon. Napocor, which entered into a Build-
Operate-Transfer (BOT) Agreement (entitled Energy Conversion Agreement)
with Mirant, was furnished a copy of the tax assessment. Napocor (not
Mirant) protested the assessment before the Local Board of Assessment Appeals
(LBAA), claiming entitlement to the tax exemptions provided under Section 234 of
the Local Government Code (LGC), which states:
Section 234.Exemptions from Real Property Tax. – The following are exempted from
payment of the real property tax: (c) All machineries and equipment that are
actually, directly, and exclusively used by local water districts and government-
owned or –controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power; (e) Machinery and
equipment used for pollution control and environmental protection. Assuming
that it cannot claim the above tax exemptions, Napocor argued that it is entitled to
certain tax privileges,
1. The lower assessment level of 10% under Section 218(d) of the LGC for
government-owned and controlled corporations engaged in the generation
and transmission of electric power, instead of the 80% assessment level
for commercial properties imposed in the assessment letter; and
2. An allowance for depreciation of the subject machineries under Section 225 of
the LGC.
ISSUE: Whether or not NAPOCOR has sufficient legal interest to protest the tax
assessment and is entitled to claimed tax exemptions and privileges.
RULING: No. Legal interest is defined as interest in property or a claim cognizable
at law, equivalent to that of a legal owner who has legal title to the property. Given
this definition, Napocor is clearly not vested with the requisite interest to protest the
tax assessment, as it is not an entity having the legal title over the machineries. It has
absolutely no solid claim of ownership or even of use and possession of the
machineries. Napocor is not entitled to any of these claimed tax exemptions and
12
privileges on the basis primarily of the defective protest filed by the Napocor. We
found that Napocor did not file a valid protest against the realty tax assessment
because it did not possess the requisite legal standing. When a taxpayer fails to
question the assessment before the LBAA, the assessment becomes final, executory,
and demandable, precluding the taxpayer from questioning the correctness of the
assessment or from invoking any defense that would reopen the question of its
liability on the merits. Under Section 226 of the LGC, any owner or person having
legal interest in the property may appeal an assessment for real property taxes to the
LBAA. Since Section 250 adopts the same language in enumerating who may pay
the tax, we equated those who are liable to pay the tax to the same entities who may
protest the tax assessment. A person legally burdened with the obligation to pay for
the tax imposed on the property has the legal interest in the property and the
personality to protest the tax assessment. At any rate, even if the Court were to brush
aside the issue of legal interest to protest, Napocor could still not successfully claim
exemption under Section 234 (c) of the LGC because to be entitled to the exemption
under that provision, there must be actual, direct, and exclusive use of machineries.
Napocor failed to satisfy these requirements. Consistent with the BOT concept and
as implemented, BPPC, the owner-manager-operator of the project is the actual user
of its machineries and equipment. BPPC’s ownership and use of the machineries and
equipment are actual, direct, and immediate, while NAPOCOR’s is contingent and,
at this stage of the BOT Agreement, not sufficient to support its claim for tax
exemption.
18. City of Pasig vs PCGG, G.R. No. 185023 August 24, 2011
FACTS: Mid-Pasig Land Development Corporation (MPLDC) owned two parcels
of land, with a total area of 18.4891 hectares, situated in Pasig City. Portions of the
properties are leased to different business establishments. In 1986, the registered
owner of MPLDC, Jose Y. Campos (Campos), voluntarily surrendered MPLDC to
the Republic of the Philippines.On 30 September 2002, the Pasig City Assessor’s
Office sent MPLDC two notices of tax delinquency for its failure to pay real
property tax on the properties for the period 1979 to 2001 totaling P256,858,555.86.
Independent Realty Corporation (IRC) President Ernesto R. Jalandoni (Jalandoni)
and Treasurer Rosario Razon informed the Pasig City Treasurer that the tax for the
period 1979 to 1986 had been paid, and that the properties were exempt from tax
beginning 1987. The Pasig City Treasurer then informed MPLDC and IRC that the
properties were not exempt from tax. Then, General Manager Antonio Merelos
(Merelos) and Jalandoni again informed the asig City Treasurer that the properties
were exempt from tax. In turn, the Pasig City Treasurer again informed Merelos that
the properties were not exempt from tax. On 20 October 2005, the Pasig City
Assessor’s Office sent MPLDC a notice of final demand for payment of tax for the
period 1987 to 2005 totaling P389,027,814.48. On the same day, MPLDC paid
P2,000,000 partial payment under protest. On 9 November 2005, MPLDC received
two warrants of levy on the properties. On 1 December 2005, respondent Republic of
the Philippines, through the PCGG, filed with the RTC a petition for prohibition with
prayer for issuance of a temporary restraining order or writ of preliminary injunction
to enjoin petitioner Pasig City from auctioning the properties and from collecting
real property tax. Subsequently, the Pasig City Treasurer offered the properties for
sale at public auction. Since there was no other bidder, Pasig City bought the
properties and was issued the corresponding certificates of sale.
On 19 December 2005, PCGG filed with the RTC an amended petition for certiorari,
prohibition and mandamus against Pasig City. PCGG prayed that: (1) the
assessments for the payment of real property tax and penalty be declared void; (2)
the warrants of levy on the properties be declared void; (3) the public auction be
declared void; (4) the issuance of certificates of sale be declared void; (5) Pasig City
be prohibited from assessing MPLDC real property tax and penalty; (6) Pasig City be
prohibited from collecting real property tax and penalty from MPLDC; (7) Pasig
City be ordered to assess the actual occupants of the properties real property tax and
penalty; and (8) Pasig City be ordered to collect real property tax and penalty from
the actual occupants of the properties. The RTC granted the petition for certiorari,
prohibition and mandamus. The CA set aside the Decision. PCGG filed an MR. The
CA reversed itself. Hence, the present petition.
ISSUE: WON the lower courts erred in granting PCGG’s petition for certiorari,
prohibition and mandamus and in ordering Pasig City to assess and collect real
property tax from the lessees of the properties.
HELD: The petition is partly meritorious. As correctly found by the RTC and the
CA, the Republic of the Philippines owns the properties. Campos voluntarily
surrendered MPLDC, which owned the properties, to the Republic of the Philippines.
In Republic of the Philippines v. Sandiganbayan, the Court stated: x x x Jose Y.
Campos, “a confessed crony of former President Ferdinand E. Marcos,” voluntarily
surrendered or turned over to the PCGG the properties, assets and corporations he
held in trust for the deposed President. Among the corporations he surrendered were
the Independent Realty Corporation and the Mid-Pasig Land Development
13
Corporation Section 234(a) of Republic Act No. 7160 states that properties owned by
the Republic of the Philippines are exempt from real property tax “except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person.” Thus, the portions of the properties not leased to taxable entities are exempt
from real estate tax while the portions of the properties leased to taxable entities are
subject to real estate tax. The law imposes the liability to pay real estate tax on the
Republic of the Philippines for the portions of the properties leased to taxable
entities. It is, of course, assumed that the Republic of the Philippines passes on the
real estate tax as part of the rent to the lessees. Article 420 of the Civil Code
classifies as properties of public dominion those that are “intended for public use,
such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads” and those that “are intended for some public service or for
the development of the national wealth.” Properties of public dominion are not only
exempt from real estate tax, they are exempt from sale at public auction. In the
present case, the parcels of land are not properties of public dominion because they
are not “intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads.” Neither are they
“intended for some public service or for the development of the national wealth.”
MPLDC leases portions of the properties to different business establishments. Thus,
the portions of the properties leased to taxable entities are not only subject to real
estate tax, they can also be sold at public auction to satisfy the tax delinquency. In
sum, only those portions of the properties leased to taxable entities are subject to real
estate tax for the period of such leases. Pasig City must, therefore, issue to
respondent new real property tax assessments covering the portions of the properties
leased to taxable entities. If the Republic of the Philippines fails to pay the real
property tax on the portions of the properties leased to taxable entities, then such
portions may be sold at public auction to satisfy the tax delinquency.
19. DEMAALA vs COA, G.R. No. 199752, February 17, 2015
FACTS: The Sangguniang Panlalawigan of Palawan enacted Provincial Ordinance
No. 332-A, Series of 1995, entitled “An Ordinance Approving and Adopting the
Code Governing the Revision of Assessments, Classification and Valuation of Real
Properties in the Province of Palawan” (Ordinance).Chapter 5, Section 48 of the
Ordinance provides for an additional levy on real property tax for the special
education fund at the rate of one-half percent or 0.5%. In conformity with Section 48
of the Ordinance, the Municipality of Narra, Palawan, with Demaala as mayor,
collected from owners of real properties located within its territory an annual tax as
special education fund at the rate of 0.5% of the assessed value of the property
subject to tax. This collection was effected through the municipal treasurer. On post-
audit, Audit Team Leader Juanito A. Nostratis issued Audit Observation
Memorandum (AOM) No. 03-005 dated August 7, 2003 in which he noted supposed
deficiencies in the special education fund collected by the Municipality of Narra. He
questioned the levy of the special education fund at therate of only 0.5% rather than
at 1%, the rate stated in Section 235 of the LGC. After evaluating AOM No. 03-005,
Regional Cluster Director Sy issued NC No. 2004-04-101 dated August 30, 2004 in
the amount of P1,125,416.56. He held Demaala, the municipal treasurer of Narra,
and all special education fund payors liable for the deficiency in special education
fund collections. The Municipality of Narra, through Demaala, filed the Motion for
Reconsideration dated December 2, 2004. It stressed that the collection of the special
education fund at the rate of 0.5% was merely in accordance with the Ordinance. On
March 9, 2005, Regional Cluster Director Sy issued an Indorsement denying this
Motion for Reconsideration. Following this, the Municipality of Narra, through
Demaala, filed an appeal with the Commission on Audit’s Legal and Adjudication
Office. It was denied. Then they filed a Petition for Review with the Commission on
Audit. The Commission on Audit ruled against Demaala with the modification that
former Palawan Vice Governor Joel T. Reyes and the other members of the
Sangguniang Panlalawigan of Palawan who enacted the Ordinance were held jointly
and severally liable with Demaala, the municipal treasurer of Narra, and the special
education fund payors.
Thereafter, Demaala, who was no longer the mayor of the Municipality of Narra,
filed a Motion for Reconsideration. Former Vice Governor Joel T. Reyes and the
other members of the Sangguniang Panlalawigan of Palawan who were held liable
filed a separate MR. The Commission on Audit’s affirmed its decision. Demaala
then filed with this court the present Petition for Certiorari.
ISSUES:
1. Did respondent commit grave abuse of discretion amounting to lack or excess of
jurisdiction in holding that there was a deficiency in the Municipality of Narra’s
collection of the additional levy for the special education fund? Subsumed in this
issue is the matter of whether a municipality within the Metropolitan Manila Area, a
city, or a province may have an additional levy on real property for the special
education fund at the rate of less than 1%?
14
2. Assuming that respondent correctly held that there was a deficiency, did
respondent commit grave abuse of discretion amounting to lack or excess or
jurisdiction in holding petitioner personally liable for the deficiency?
RULING: YES. Consistent with the 1987 Constitution’s declared preference, the
taxing powers of local government units must be resolved in favor of their local
fiscal autonomy. The limits on the level of additional levy for the special education
fund under Section 235 of the Local Government Code should be read as granting
fiscal flexibility to local government units. Section 235 of the Local Government
Code allows provinces and cities, as well as municipalities in Metro Manila, to
collect, on top of the basic annual real property tax, an additional levy which shall
exclusively accrue to the special education fund. The operative phrase in Section
235’s grant to municipalities in Metro Manila, cities, and provinces of the power to
impose an additional levy for the special education fund is prefixed with “may,”
thus, “may levy and collect an annual tax of one percent (1%).” In Buklod nang
Magbubukid sa Lupaing Ramos, Inc. v. E.M. Ramos and Sons, Inc. the meaning of
“may” was discussed as follows: Where the provision reads “may,” this word shows
that it is not mandatory but discretionary. It is an auxiliary verb indicating liberty,
opportunity, permission and possibility. The use of the word “may” in a statute
denotes that it is directory in nature and generally permissive only.
Respondent concedes that Section 235’s grant to municipalities in Metro Manila, to
cities, and to provinces of the power to impose an additional levy for the special
education fund makes its collection optional. It is not mandatory that the levy be
imposed and collected. The controversy which the Commission on Audit created is
not whether these local government units have discretion to collect but whether they
have discretion on the rate at which they are to collect. It is respondent’s position
that the option granted to a local government unit is limited to the matter of whether
it shall actually collect, and that the rate at which it shall collect (should it choose to
do so) is fixed by Section 235. In contrast, it is petitioner’s contention that the option
given to a local goverment unit extends not only to the matter of whether to collect
but also to the rate at which collection is to be made.
We sustain the position of petitioner. Section 235’s permissive language is
unqualified. Moreover, there is no limiting qualifier to the articulated rate of 1%
which unequivocally indicates that any and all special education fund collections
must be at such rate.
2.YES. It was an error amounting to grave abuse of discretion for respondent to hold
petitioner personally liable for the supposed deficiency. Having established the
propriety of imposing an additional levy for the special education fund at the rate of
0.5%, it follows that there was nothing erroneous in the Municipality of Narra’s
having acted pursuant to Section 48 of the Ordinance Likewise, it follows that it was
an error for respondent to hold petitioner personally liable for the supposed
deficiency in collections. Even if a contrary ruling were to be had on the propriety of
collecting at a rate less than 1%, it would still not follow that petitioner is personally
liable for deficiencies.The actions of the officials of the Municipality of Narra are
consistent with the rule that ordinances are presumed valid. The mayor’s actions
were done pursuant to an ordinance which, at the time of the collection, was yet to be
invalidated. It is basic that laws and local ordinances are “presumed to be valid
unless and until the courts declare the contrary in clear and unequivocal terms.”Thus,
the concerned officials of the Municipality of Narra, Palawan must be deemed to
have conducted themselves in good faith and with regularity when they acted
pursuant to Chapter 5, Section 48 of Provincial Ordinance No. 332-A, Series of
1995, and collected the additional levy for the special education fund at the rate of
0.5%.
20. Meralco v. City Assessor GR No. 166102
FACTS: Before the Court is a Petition for Review on Certiorari seeking the reversal
of the Decision1 dated May 13, 2004 and Resolution dated November 18, 2004 of
the Court of Appeals in CA-G.R. SP No. 67027. The appellate court affirmed the
Decision3 dated May 3, 2001 of the Central Board of Assessment Appeals (CBAA)
in CBAA Case No. L-20-98, which, in turn, affirmed with modification the Decision
dated June 17, 19985 of the Local Board of Assessment Appeals (LBAA) of Lucena
City, Quezon Province, as regards Tax Declaration Nos. 019-6500 and 019-7394,
ruling that MERALCO is liable for real property tax on its transformers, electric
posts (or poles), transmission lines, insulators, and electric meters, beginning 1992.
MERALCO failed to persuade the Court of Appeals that the transformers,
transmission lines, insulators, and electric meters mounted on the electric posts of
MERALCO were not real properties. The appellate court invoked the definition of
"machinery" under Section 199(o) of the Local Government Code and then wrote
that:
We firmly believe and so hold that the wires, insulators, transformers and
electric meters mounted on the poles of [MERALCO] may nevertheless be
15
 considered as improvements on the land, enhancing its utility and rendering
it useful in distributing electricity. The said properties are actually, directly
and exclusively used to meet the needs of [MERALCO] in the distribution of
electricity.
In addition, "improvements on land are commonly taxed as realty even though for
some purposes they might be considered personalty. It is a familiar personalty
phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property."
Issue: Whether or not the transformers, electric posts (or poles), transmission lines,
insulators, and electric meters are real properties.
Held: While the Local Government Code still does not provide for a specific
definition of "real property," Sections 199(o) and 232 of the said Code, respectively,
gives an extensive definition of what constitutes "machinery" and unequivocally
subjects such machinery to real property tax. The Court reiterates that the machinery
subject to real property tax under the Local Government Code "may or may not be
attached, permanently or temporarily to the real property;" and the physical facilities
for production, installations, and appurtenant service facilities, those which are
mobile, self-powered or self-propelled, or are not permanently attached must (a) be
actually, directly, and exclusively used to meet the needs of the particular industry,
business, or activity; and (2) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural
purposes.
Article 415, paragraph (1) of the Civil Code declares as immovables or real
properties "[l]and, buildings, roads and constructions of all kinds adhered to the
soil." The land, buildings, and roads are immovables by nature "which cannot be
moved from place to place," whereas the constructions adhered to the soil are
immovables by incorporation "which are essentially movables, but are attached to an
immovable in such manner as to be an integral part thereof."57 Article 415,
paragraph (3) of the Civil Code, referring to "[ejverything attached to an immovable
in a fixed manner, in such a way that it cannot be separated therefrom without
breaking the material or deterioration of the object," are likewise immovables by
incorporation. In contrast, the Local Government Code considers as real property
machinery which "may or may not be attached, permanently or temporarily to the
real property," and even those which are "mobile."
Article 415, paragraph (5) of the Civil Code considers as immovables or real
properties "[machinery, receptacles, instruments or implements intended by the
owner of the tenement for an industry or works which may be carried on in a
building or on a piece of land, and which tend directly to meet the needs of the said
industry or works." The Civil Code, however, does not define "machinery."
The properties under Article 415, paragraph (5) of the Civil Code are immovables by
destination, or "those which are essentially movables, but by the purpose for which
they have been placed in an immovable, partake of the nature of the latter because of
the added utility derived therefrom."58 These properties, including machinery,
become immobilized if the following requisites concur: (a) they are placed in the
tenement by the owner of such tenement; (b) they are destined for use in the industry
or work in the tenement; and (c) they tend to directly meet the needs of said industry
or works.59 The first two requisites are not found anywhere in the Local
Government Code. Furthermore, in Caltex (Philippines), Inc. v. Central Board of
Assessment Appeals,62 the Court acknowledged that "[i]t is a familiar phenomenon
to see things classed as real property for purposes of taxation which on general
principle might be considered personal property[.]" Therefore, for determining
whether machinery is real property subject to real property tax, the definition and
requirements under the Local Government Code are controlling.
21. City of Lapu-Lapu vs. Philippine Economic Zone Authority, G.R. No.
184203 November 26, 2014
FACTS: These are consolidated petitions for review on certiorari the City of Lapu-
Lapu and the Province of Bataan separately filed against the Philippine Economic
Zone Authority (PEZA). In G.R. No. 184203, the City of Lapu-Lapu assails the
CA`s decision dismissing the City`s appeal appealing the RTC`s decision finding the
PEZA exempt from payment of real property taxes. In G.R. No. 187583, the
Province of Bataan assails the Court of Appeals` decision ruling that the RTC
gravely abused its discretion in finding the PEZA liable for real property taxes to the
Province of Bataan President Ferdinand E. Marcos issued Presidential Decree No. 66
in 1972, declaring as government policy the establishment of export processing
zones. The Export Processing Zone Authority (EPZA) was created to operate,
administer, and manage the export processing zones established in the Port of
Mariveles, Bataan and such other export processing zones that may be created by
virtue of the decree. The decree declared the EPZA nonprofit in character with all its
revenues devoted to its development, improvement, and maintenance. To maintain
16
this nonprofit character, the EPZA was declared exempt from all taxes that may be
due to the Republic of the Philippines, its provinces, cities, municipalities, and other
government agencies and instrumentalities. Specifically, Section 21 of Presidential
Decree No. 66 declared the EPZA exempt from payment of real property taxes In
1995, the PEZA was created by virtue of Republic Act No. 7916 or the Special
Economic Zone Act of 1995 to operate, administer, manage, and develop economic
zones in the country. On October 30, 1995, President Fidel V. Ramos issued
Executive Order No. 282, directing the PEZA to assume and exercise all of the
EPZA`s powers, functions, and responsibilities as provided in Presidential Decree
No. 66, as amended, insofar as they are not inconsistent with the powers, functions,
and responsibilities of the PEZA, as mandated under the Special Economic Zone Act
of 1995. All of EPZA`s properties, equipment, and assets, among others, were
ordered transferred to the PEZA.
ISSUE: Is the PEZA liable for real property tax?
RULING: NO. PEZA is a government instrumentality. An instrumentality is any
agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some
if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. As an instrumentality of the national
government, the PEZA is vested with special functions or jurisdiction by law.
Congress created the PEZA to operate, administer, manage and develop special
economic zones in the Philippines. Special economic zones are areas with highly
developed or which have the potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and financial centers. Being an
instrumentality of the national government, the PEZA cannot be taxed by local
government units. Although a body corporate vested with some corporate powers,
the PEZA is not a government-owned or -controlled corporation taxable for real
property taxes.
Under the Special Economic Zone Act of 1995, the PEZA was established primarily
to perform the governmental function of operating, administering, managing, and
developing special economic zones to attract investments and provide opportunities
for preferential use of Filipino labor. Under its charter, the PEZA was created a body
corporate endowed with some corporate powers. However, it was not organized as a
stock or nonstock corporation. Nothing in the PEZA`s charter provides that the
PEZA`s capital is divided into shares. The PEZA also has no members who shall
share in the PEZA`s profits. We rule that the PEZA is exempt from real property
taxes by virtue of its charter. A provision in the Special Economic Zone Act of 1995
explicitly exempting the PEZA is unnecessary. The PEZA assumed the real property
exemption of the EPZA under Presidential Decree No. 66. Section 11 of the Special
Economic Zone Act of 1995 mandated the EPZA to evolve into the PEZA in
accordance with the guidelines and regulations set forth in an executive order issued
for this purpose. President Ramos then issued Executive Order No. 282 in 1995,
ordering the PEZA to assume the EPZA`s powers, functions, and responsibilities
under Presidential Decree No. 66 not inconsistent with the Special Economic Zone
Act of 1995.
22. CITY ASSESSOR OF CEBU CITY, petitioner vs. ASSOCIATION OF
BENEVOLA DE CEBU, INC., G.R. No. 152904 June 8, 2007
Facts: Respondent Association of Benevola de Cebu, Inc. is a non-stock, non-profit
organization organized under the laws of the Republic of the Philippines and is the
owner of Chong Hua Hospital (CHH) in Cebu City. In the late 1990’s, respondent
constructed the CHH Medical Arts Center (CHHMAC). Thereafter, an April 17,
1998 Certificate of Occupancy7 was issued to the center with a classification of
"Commercial [Clinic]." Petitioner City Assessor of Cebu City assessed the
CHHMAC building under Tax Declaration (TD) No. ’97 GR-04-024-02529 as
"commercial" with a market value of PhP 28,060,520 and an assessed value of PhP
9,821,180 at the assessment level of 35% for commercial buildings, and not at the
10% special assessment currently imposed for CHH and its other separate
buildings—the CHH’s Dietary and Records Departments. Thus, respondent filed its
September 15, 1998 letter-petition with the Cebu City LBAA for reconsideration,
asserting that CHHMAC is part of CHH and ought to be imposed the same special
assessment level of 10% with that of CHH. On September 25, 1998, respondent
formally filed its appeal with the LBAA.the LBAA directed petitioner to conduct an
ocular inspection of the subject property and to submit a report on the scheduled date
of hearing. In the October 7, 1998 hearing, the parties were required to submit their
respective position papers.
In its position paper, petitioner argued that CHHMAC is a newly constructed five-
storey building situated about 100 meters away from CHH and, based on actual
inspection, was ascertained that it is not a part of the CHH building but a separate
building which is actually used as commercial clinic/room spaces for renting out to
physicians and, thus, classified as "commercial." Petitioner contended that in turn the
17
medical specialists in CHHMAC charge consultation fees for patients who consult
for diagnosis and relief of bodily ailment together with the ancillary (or support)
services which include the areas of anesthesia, radiology, pathology, and more.
Petitioner concluded the foregoing set up to be ultimately geared for commercial
purposes, and thus having the proper classification as "commercial" under Building
Permit No. B01-9750087 pursuant to Section 10 of the Local Assessment
Regulations No. 1-92 issued by the Department of Finance (DOF). On the other
hand, respondent contended in its position paper that CHHMAC building is actually,
directly, and exclusively part of CHH and should have a special assessment level of
10% as provided under City Tax Ordinance LXX. Respondent asserted that the
CHHMAC building is similarly situated as the buildings of CHH, housing its Dietary
and Records Departments, are completely separate from the main CHH building and
are imposed the 10% special assessment level. In fine, respondent argued that the
CHHMAC, though not actually indispensable, is nonetheless incidental and
reasonably necessary to CHH’s operations.
LBAA: issued declaring that the building is entitled to a ten (10) percent assessment
level.
CBAA: affirming in toto the LBAA Decision and resolved the issue of whether the
subject building of CHHMAC is part and parcel of CHH.
CA: affirmed CBAA
Issue: WHETHER OR NOT THE NEW BUILDING IS LIABLE TO PAY THE
35% ASSESSMENT LEVEL
Ruling: No. Chong Hua Hospital Medical Arts Center is an integral part of Chong
Hua Hospital. We so hold that CHHMAC is an integral part of CHH. It is undisputed
that the doctors and medical specialists holding clinics in CHHMAC are those duly
accredited by CHH, that is, they are consultants of the hospital and the ones who can
treat CHH’s patients confined in it. This fact alone takes away CHHMAC from
being categorized as "commercial" since a tertiary hospital like CHH is required by
law to have a pool of physicians who comprises the required medical departments in
various medical fields. As aptly pointed out by respondent:
Chong Hua Hospital is a duly licensed tertiary hospital and is covered by Dept. of
Health (DOH) Adm. Order No. 68-A and the "1989 Revised Rules and Regulations"
governing the registration, licensure and operation of hospitals in the Philippines.
Under Sec. 6, sub-sec. 6.3, it is mandated by law, that respondent appellee in order to
retain its classification as a "TERTIARY HOSPITAL," must be fully
departmentalized and equipped with the service capabilities needed to support
certified medical specialists and other licensed physicians rendering services in the
field of medicine, pediatrics, obstetrics and gynecology, surgery, and their sub-
specialties, ICCU and ancillary services which is precisely the function of the Chong
Hua Hospital Medical Arts Center.24
Sec. 6.3, Administrative Order No. (AO) 68-A, Series of 1989, Revised Rules and
Regulations Governing the Registration, Licensure and Operation of Hospitals in the
Philippines pertinently provides:
Tertiary Hospital –– is fully departmentalized and equipped with the service
capabilities needed to support certified medical specialists and other licensed
physicians rendering services in the field of Medicine, Pediatrics, Obstetrics and
Gynecology, Surgery, their subspecialties and ancillary services. (Emphasis
supplied.)
Moreover, AO 68-A likewise provides what clinic service and medical ancillary
service are, thus:
11.3.2 Clinical Service––The medical services to patients shall be performed by the
medical staff appointed by the governing body of the institution. x x x
11.3.3 Medical Ancillary Service––These are support services which include
Anesthesia Department, Pathology Department, Radiology Department, Out-Patient
Department (OPD), Emergency Service, Dental, Pharmacy, Medical Records and
Medical Social Services.
Based on these provisions, these physicians holding offices or clinics in CHHMAC,
duly appointed or accredited by CHH, precisely fulfill and carry out their roles in the
hospital’s services for its patients through the CHHMAC. The fact that they are
holding office in a separate building, like at CHHMAC, does not take away the
essence and nature of their services vis-à-vis the over-all operation of the hospital
18
and the benefits to the hospital’s patients. Given what the law requires, it is clear that
CHHMAC is an integral part of CHH. These accredited physicians normally hold
offices within the premises of the hospital; in which case there is no question as to
the conduct of their business in the ambit of diagnosis, treatment and/or confinement
of patients. This was the case before 1998 and before CHHMAC was built. Verily,
their transfer to a more spacious and, perhaps, convenient place and location for the
benefit of the hospital’s patients does not remove them from being an integral part of
the overall operation of the hospital. Conversely, it would have been different if
CHHMAC was also open for non-accredited physicians, that is, any medical
practitioner, for then respondent would be running a commercial building for lease
only to doctors which would indeed subject the CHHMAC to the commercial level
of 35% assessment.
Moreover, the CHHMAC, being hundred meters away from the CHH main building,
does not denigrate from its being an integral part of the latter. As aptly applied by the
CBAA, the Herrera ruling on what constitutes property exempt from taxation is
indeed applicable in the instant case, thus: Moreover, the exemption in favor of
property used exclusively for charitable or educational purposes is "not limited to
property actually indispensable" therefore (Cooley on Taxation, Vol. 2, p. 1430), but
extends to facilities which are "incidental to and reasonably necessary for" the
accomplishment of said purposes, such as, in the case of hospitals, "a school for
training nurses, a nurses’ home, property use to provide housing facilities for interns,
resident doctors, superintendents, and other members of the hospital staff, and
recreational facilities for student nurses, interns and residents" (84 C.J.S., 621), such
as "athletic fields," including "a farm used for the inmates of the institution" (Cooley
on Taxation, Vol. 2, p. 1430).25
Verily, being an integral part of CHH, CHHMAC should be under the same special
assessment level of as that of the former. The CHHMAC facility is definitely
incidental to and reasonably necessary for the operations of Chong Hua Hospital.
Given our discussion above, the CHHMAC facility, while seemingly not
indispensable to the operations of CHH, is definitely incidental to and reasonably
necessary for the operations of the hospital. Considering the legal requirements and
the ramifications of the medical and clinical operations that have been transferred to
the CHHMAC from the CHH main building in light of the accredited physicians’
transfer of offices in 1998 after the CHHMAC building was finished, it cannot be
gainsaid that the services done in CHHMAC are indispensable and essential to the
hospital’s operation. Thus, the importance of CHHMAC in the operation of CHH
cannot be over-emphasized nor disputed. Clearly, it plays a key role and provides
critical support to hospital operations.
Respondent’s explanation on this point is well taken. First, CHHMAC is only for its
consultants or accredited doctors and medical specialists. Second, the charging of
rentals is a practical necessity: (1) to recoup the investment cost of the building, (2)
to cover the rentals for the lot CHHMAC is built on, and (3) to maintain the
CHHMAC building and its facilities. Third, as correctly pointed out by respondent, it
pays the proper taxes for its rental income. And, fourth, if there is indeed any net
income from the lease income of CHHMAC, such does not inure to any private or
individual person as it will be used for respondent’s other charitable projects.
We fail to see any reason why the CHHMAC building should be classified as
"commercial" and be imposed the commercial level of 35% as it is not operated
primarily for profit but as an integral part of CHH. The CHHMAC, with operations
being devoted for the benefit of the CHH’s patients, should be accorded the 10%
special assessment. In this regard, we point with approbation the appellate court’s
application of Sec. 216 in relation with Sec. 215 of the Local Government Code on
the proper classification of the subject CHHMAC building as "special" and not
"commercial." Secs. 215 and 216 pertinently provide:
SEC. 215. Classes of Real Property for Assessment Purposes.—For purposes of
assessment, real property shall be classified as residential, agricultural, commercial,
industrial, mineral, timberland or special.
SEC. 216. Special Classes of Real Property.––All lands, buildings, and other
improvements thereon actually, directly and exclusively used for hospitals, cultural
or scientific purposes, and those owned and used by local water districts, and
government-owned or controlled corporations rendering essential public services in
the supply and distribution of water and/or generation and transmission of electric
power shall be classified as special.
Thus, applying the above provisos in line with City Tax Ordinance LXX of Cebu
City, the 10% special assessment should be imposed for the CHHMAC building
which should be classified as "special."
19