GR 144104; (June, 2004) (Digest)
G.R. No. 144104; June 29, 2004
LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his capacity as City Assessor of Quezon City, respondents.
FACTS
The Lung Center of the Philippines, a non-stock, non-profit entity created under P.D. No. 1823, is the registered owner of a parcel of land in Quezon City where its hospital stands. The City Assessor assessed the land and hospital building for real property tax. The petitioner filed a claim for exemption, asserting it is a charitable institution under the Constitution. It argued that a significant portion of its services and bed capacity is devoted to charity patients. The Local and Central Boards of Assessment Appeals denied the claim, ruling the properties were not exclusively used for charitable purposes. The Court of Appeals affirmed these decisions.
The petitioner leases substantial portions of its property for commercial purposes: a big space on the ground floor is leased to private parties for canteens, stores, and private clinics, and a large area is leased to the Elliptical Orchids and Garden Center. The hospital also admits paying patients. The petitioner contends these income-generating activities support its charitable operations and do not negate its tax-exempt status.
ISSUE
Whether the petitioner Lung Center of the Philippines is exempt from real property tax under Section 28(3), Article VI of the 1987 Constitution, which requires that the property be “actually, directly, and exclusively used” for charitable purposes.
RULING
The Supreme Court DENIED the petition and AFFIRMED the assailed decision. The petitioner is not entitled to real property tax exemption. The constitutional provision mandates that for tax exemption to apply, the property itself must be actually, directly, and exclusively used for charitable purposes. The term “exclusively” means “solely” or “without any other purpose.”
The Court found that the petitioner failed to meet this strict constitutional test. While the hospital may engage in charitable activities, the subject properties are not used exclusively for such purposes. The leasing of portions of the land and building to private entities for commercial gain, and the use of spaces for private clinics that serve paying patients, constitute use for a purpose other than charity. These are proprietary uses conducted for income. The property is therefore not devoted “exclusively” to charitable work. The Court distinguished between the institution’s character and the actual use of its property; exemption is predicated on the latter. The income derived from these leases and services, even if used to subsidize charity patients, does not convert the character of the property’s use. Consequently, the real property is subject to assessment and taxation.