327 Cases Penned by Associate Justice Amy Lazaro-Javier: 2025 Bar Examination
Does the Philippine Heart
Center (PHC) enjoy an absolute exemption from local property taxes, even when
part of its properties is leased to private commercial entities?
Facts of the Case:
The Philippine Heart Center
(PHC), established by Presidential Decree 673 in 1975, is a specialty hospital
mandated to provide cardiovascular care to the general public, especially the
underprivileged. To aid in its mission, the government granted PHC certain tax
exemptions, including a 10-year exemption from all taxes, which was extended
indefinitely by Letter of Instruction 1455.
In 2004, Quezon City assessed PHC
for unpaid real property taxes on eleven properties amounting to over PHP 36
million. These properties included land and buildings located in Quezon City.
PHC sought to have these taxes condoned or reduced, and subsequently entered
into two Memoranda of Agreement (MOAs) with the city government, wherein PHC
would provide free medical services in lieu of paying taxes. However, PHC later
suspended these MOAs, citing the Supreme Court's ruling in Manila International
Airport Authority (MIAA) v. Court of Appeals, which granted government
instrumentalities exemption from local taxes. Despite this, Quezon City issued
a warrant of levy and eventually auctioned off PHC's properties after they
failed to pay the taxes due.
PHC filed a petition for
certiorari with the Court of Appeals, claiming its properties should be exempt
from taxes. The Court of Appeals dismissed the petition, ruling that certiorari
was not the proper remedy because the actions of the city officials were
neither judicial nor quasi-judicial. PHC appealed to the Supreme Court,
reiterating its exemption from local taxes as a government instrumentality and
a charitable institution.
Primary Issue:
Is the Philippine Heart Center
exempt from real property taxes, even for portions of its properties leased to
private entities?
Ruling of the Supreme Court:
The Supreme Court ruled that the
Philippine Heart Center (PHC) is a government instrumentality vested with
corporate powers, and as such, it is generally exempt from local taxes under
Section 133(o) of the Local Government Code. This provision bars local
government units from taxing national government instrumentalities. However,
the Court clarified that while PHC is exempt, any portions of its properties
that are leased to private entities are not exempt from real property taxes.
The exemption applies only to properties that are used directly and exclusively
for PHC's public, charitable purposes.
Thus, the Court annulled the real
property tax assessments and the subsequent auction of PHC’s properties.
However, the Court also emphasized that the private entities leasing parts of
PHC’s properties are liable for real property taxes, not PHC itself.
Dispositive Portion:
The Supreme Court granted the
petition and declared the following:
- The Philippine Heart Center and its properties, which
are utilized in relation to its mandate as a specialty hospital, are
exempt from the real property taxes of the Quezon City Government.
- The real property tax assessments, final notices of
delinquencies, and the warrant of levy issued by the Quezon City
government against the Philippine Heart Center and its properties are
void.
- The sale of PHC's properties at public auction and
their purchase by the Quezon City Government are also void.
Should charitable government
institutions, which receive public funding and operate at a loss, be allowed to
lease parts of their tax-exempt properties to private businesses without
contributing to local taxes?
Important Doctrines:
- Exemption of Government Instrumentalities from
Local Taxes (Section 133(o) of the Local Government Code)
- Government instrumentalities are exempt from
local taxes unless expressly stated otherwise by law. This includes real
property taxes, provided the properties are used for public service or
government functions.
- Taxation of Leased Government Properties (Section
234(a) of the Local Government Code)
- While government properties are exempt from real
property taxes, any portions leased to private entities become taxable.
The lessees, not the government, are liable for such taxes.
- Beneficial Use Doctrine (Lung Center of the
Philippines v. Quezon City)
- A government-owned charitable institution is
exempt from real property taxes only for the portions of its properties
used directly for its public functions. Properties leased to private
businesses for profit are subject to local taxes.
This case falls under Taxation
Law.
From <https://chatgpt.com/c/66f014df-033c-800a-bb52-d197658eaefc>
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🎓This content presents a
brief yet substantive overview of the Supreme Court ruling in Philippine Heart
Center v. The Local Government of Quezon City, G.R. No. 225409, promulgated on March
11, 2020. As part of our continuing series to assist law students, bar
candidates (baristas), and legal professionals, we highlight key doctrines and
legal principles for easier memorization and understanding.
This case is a Taxation Law
case concerning the validity of the assessment, levy, and auction sale of real
properties of the Philippine Heart Center (PHC) for non-payment of real
property taxes. PHC claimed exemption as a government instrumentality and
charitable institution, while Quezon City insisted on taxing portions allegedly
leased to private entities.
The Supreme Court ruled in
favor of PHC, declaring it exempt from real property tax as a government
instrumentality, but clarified that portions of PHC properties leased to
private taxable entities are not exempt.
Should government hospitals
be allowed to lease their land to private businesses without paying local
taxes, even if the revenue is used to sustain public health services?
🎓 TOP 10 IMPORTANT
DOCTRINES FROM THE CASE (for social media use):
- Government Instrumentality Exemption (Sec.
133[o], LGC):
Local governments cannot tax national government instrumentalities, unless explicitly authorized by law. (Philippine Heart Center v. Quezon City, G.R. No. 225409) - Corporate Status Doesn't Remove Tax Exemption:
Being vested with corporate powers does not remove PHC’s character as a government instrumentality. (PD 673; MIAA doctrine) - Property Used for Public Welfare is Non-Taxable:
Real properties used directly for public health services are exempt from real property tax. (Sec. 234[a], LGC) - Leased Government Property is Taxable:
Portions of PHC properties leased to Globe, Jollibee, etc., are subject to local tax, as beneficial use was transferred to private entities. (Lung Center of the Philippines v. Quezon City) - Invalid Levy on Exempt Government Property:
Public auction of government properties for tax delinquency is void if no clear proof links the property to a taxable private use. (Sec. 256, LGC) - Certiorari Can Challenge Executive Actions:
Certiorari is proper even against non-judicial actors if there is grave abuse of discretion, invoking the Court's expanded judicial power. (Art. VIII, Sec. 1, 1987 Constitution) - Liberal Construction on Verification
Requirements:
Substantial compliance with verification and certification against forum shopping is allowed if the signatory has clear authority. (Rule 7, Secs. 4–5, Rules of Court) - Doctrine of Beneficial Use (Sec. 234[a], LGC):
Tax exemption of government properties ends when beneficial use is granted to taxable private persons. (GSIS v. City of Manila; PFDA v. CBAA) - Doctrine of Finality of Judgment:
Once a Court of Appeals ruling attains finality, it cannot be revisited, even if factually erroneous. (Re: Licerio, G.R. No. 208005) - Proceeds of MOAs Cannot Waive Legal Rights:
Entering MOAs with LGUs does not imply waiver of legal tax exemptions if government policy and jurisprudence later clarify non-liability. (PHC’s MOA with QC)
📌 DISCLAIMER:
This video is for educational
and informational purposes only. It does not constitute legal advice. We do not
guarantee the infallibility of the content. Made using premium AI with
reference to the full text of G.R. No. 225409, March 11, 2020.
❓ FREQUENTLY ASKED QUESTIONS
(FAQs):
- Q: Is the Philippine Heart Center completely
tax-exempt?
A: No. It is exempt as a government instrumentality, but leases to private businesses are taxable. - Q: Can a local government auction off government
hospital properties?
A: No. Public auction of exempt government property is void, unless the lessee is taxable and proven liable. - Q: Does being a corporation remove PHC’s tax
exemption?
A: No. PHC’s corporate powers do not negate its status as a government instrumentality. - Q: Can certiorari be used against city hall
officials?
A: Yes, if their acts constitute grave abuse of discretion, even if not quasi-judicial. - Q: What is the importance of “beneficial use” in
taxation?
A: If a government property’s beneficial use is transferred to a private entity, that portion becomes taxable.
Philippine Heart Center vs. The Local Government of
Quezon City, City Mayor of Quezon City, City Treasurer of Quezon City, and City
Assessor of Quezon City
G.R. No. 225409 | Promulgated: March 11, 2020
🧠 This case revolves
around the real property tax liability of the Philippine Heart Center (PHC)—a
government specialty hospital—whose properties in Quezon City were levied and
sold at public auction for non-payment of taxes. PHC insisted on its exemption
as a government instrumentality and a charitable institution, while the
city argued otherwise, especially for portions leased to private entities like
fast food chains and telecom companies.
The Supreme Court ultimately held that PHC, being a government
instrumentality vested with corporate powers, is exempt from real
property taxes for portions used in the exercise of its public functions.
However, portions leased to private businesses are not exempt and may be
taxed accordingly. Furthermore, the Court declared the levy and auction of
PHC properties void, as the proper procedures and identification of taxable
persons were not followed.
📌 Answer key will be
provided at the end of the video. Now, let’s test your understanding
through a set of Higher Order Thinking Skills (HOTS) multiple-choice
questions.
🔍 QUIZZER – EASY
DIFFICULTY (10 HOTS Multiple Choice Questions)
- What
was the primary reason the Supreme Court declared PHC exempt from real
property taxes?
A. It had a standing MOA with Quezon City
B. It provided services to the residents of Quezon City
C. It is a government instrumentality serving public health
D. It is located on government land - Which
of the following properties of PHC may be subjected to local real
property tax?
A. Emergency rooms used for indigent patients
B. Operating rooms used for heart surgeries
C. Spaces leased to private commercial businesses
D. Training facilities for government doctors - Why
did the Supreme Court void the public auction of PHC’s properties?
A. Because it was done without Presidential approval
B. Because PHC had already paid the tax
C. Because no proper court order was issued
D. Because it involved exempt government properties - What
legal remedy did PHC properly use to challenge the actions of Quezon City
officials?
A. Petition for declaratory relief
B. Ordinary civil action for damages
C. Special civil action for certiorari
D. Administrative complaint with the DILG - What
is the significance of the PHC being classified as a government
instrumentality?
A. It cannot be sued in court
B. It is automatically part of local government
C. It enjoys immunity from audit
D. It is generally exempt from local taxation - What
procedural issue was raised against PHC regarding its petition?
A. Lack of legal personality
B. Forum shopping and verification defects
C. Absence of legal counsel
D. Violation of double jeopardy - The
Supreme Court emphasized that PHC’s mission is centered on:
A. Earning revenue from medical tourism
B. Public health and cardiovascular treatment
C. Leasing its facilities for profit
D. Operating as a self-sustaining corporation - In
taxation law, a government property leased to a private business becomes:
A. Still fully exempt due to ownership
B. Taxable due to beneficial use transfer
C. Part of the public dominion
D. Automatically owned by the lessee - What
did the Court say about certiorari as a remedy for non-judicial actions?
A. It is never applicable
B. It is allowed only if supported by the President
C. It is proper when grave abuse of discretion is shown
D. It is available only after appeal is exhausted - What
principle did the Court apply regarding PHC's function in national
healthcare?
A. It has priority over tax collection when public health is at risk
B. It must always pay taxes like private hospitals
C. It should privatize to avoid liability
D. It must obtain DILG certification to remain exempt
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