Lung Center of the Philippines vs.

Quezon City [GR No. 144104 June 29,

2004]
Post under case digests, Taxation at Tuesday, March 20, 2012 Posted by
Schizophrenic Mind

Facts: Lung Center of the Philippines is a non-stock

and non-profit entity established by virtue of PD No.
1823. It is the registered owner of the land on which
the Lung Center of the Philippines Hospital is
erected. A big space in the ground floor of the
hospital is being leased to private parties, for
canteen and small store spaces, and to medical or
professional practitioners who use the same as their
private clinics. Also, a big portion on the right side of
the hospital is being leased for commercial
purposes to a private enterprise known as the
Elliptical Orchids and Garden Center.
When the City Assessor of Quezon City assessed
both its land and hospital building for real property
taxes, the Lung Center of the Philippines filed a
claim for exemption on its averment that it is a
charitable institution with a minimum of 60% of its
hospital beds exclusively used for charity patients
and that the major thrust of its hospital operation is
to serve charity patients. The claim for exemption
was denied, prompting a petition for the reversal of
the resolution of the City Assessor with the Local
Board of Assessment Appeals of Quezon City,
which denied the same. On appeal, the Central
Board of Assessment Appeals of Quezon City
affirmed the local boards decision, finding that Lung
Center of the Philippines is not a charitable

institution and that its properties were not actually,

directly and exclusively used for charitable
purposes. Hence, the present petition for review
with averments that the Lung Center of the
Philippines is a charitable institution under Section
28(3), Article VI of the Constitution, notwithstanding
that it accepts paying patients and rents out
portions of the hospital building to private
individuals and enterprises.
Issue: Is the Lung Center of the Philippines a
charitable institution within the context of the
Constitution, and therefore, exempt from real
property tax?
Held: The Lung Center of the Philippines is a
charitable institution. To determine whether an
enterprise is a charitable institution or not, the
elements which should be considered include the
statute creating the enterprise, its corporate
purposes, its constitution and by-laws, the methods
of administration, the nature of the actual work
performed, that character of the services rendered,
the indefiniteness of the beneficiaries and the use
and occupation of the properties.
However, under the Constitution, in order to be
entitled to exemption from real property tax, there
must be clear and unequivocal proof that (1) it is a
charitable institution and (2)its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used
for charitable purposes. While portions of the
hospital are used for treatment of patients and the

dispensation of medical services to them, whether

paying or non-paying, other portions thereof are
being leased to private individuals and enterprises.
Exclusive is defined as possessed and enjoyed to
the exclusion of others, debarred from participation
or enjoyment. If real property is used for one or
more commercial purposes, it is not exclusively
used for the exempted purposes but is subject to
taxation.